Modern Monetary Theory

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pages: 338 words: 104,684

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, Bernie Madoff, Bernie Sanders, blockchain, bond market vigilante , Bretton Woods, business cycle, capital controls, central bank independence, collective bargaining, Covid-19, COVID-19, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, decarbonisation, deindustrialization, discrete time, Donald Trump, eurozone crisis, fiat currency, floating exchange rates, Food sovereignty, full employment, Gini coefficient, global reserve currency, global supply chain, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, Jeff Bezos, liquidity trap, Mahatma Gandhi, manufacturing employment, market bubble, Mason jar, Modern Monetary Theory, mortgage debt, Naomi Klein, National Debt Clock, new economy, New Urbanism, Nixon shock, Nixon triggered the end of the Bretton Woods system, obamacare, open economy, Paul Samuelson, Ponzi scheme, Post-Keynesian economics, price anchoring, price stability, pushing on a string, quantitative easing, race to the bottom, reserve currency, Richard Florida, Ronald Reagan, San Francisco homelessness, shareholder value, Silicon Valley, Tax Reform Act of 1986, trade liberalization, urban planning, working-age population, Works Progress Administration, yield curve, zero-sum game

Noureddine Taboubi, “Strikes Overturn Wage Cuts, but IMF Blindness Risks Ruining Tunisia,” Bretton Woods Project, April 4, 2019, www.brettonwoodsproject.org/2019/04/strikes-overturn-wage-bill-but-imf-blindness-risks-ruining-tunisia/. 25. John T. Harvey, Currencies, Capital Flows and Crises: A Post Keynesian Analysis of Exchange Rate Determination (Abingdon, UK: Routledge, 2009). 26. Bill Mitchell, “Modern Monetary Theory in an Open Economy,” Modern Monetary Theory, October 13, 2009, bilbo.economicoutlook.net/blog/?p=5402. 27. Predictably, the Volcker shock also devastated US workers, shutting down factories in the Midwest and ending manufacturing competitiveness with countries like Japan. Had the US established a job guarantee employment policy to automatically stabilize the economy at full employment—as MMTers and our forebears would have recommended and as many US civil rights activists were recommending—perhaps people around the world could have avoided this catastrophe. 28.

To find out more, go to www.hachettespeakersbureau.com or call (866) 376-6591. The publisher is not responsible for websites (or their content) that are not owned by the publisher. Library of Congress Cataloging-in-Publication Data Names: Kelton, Stephanie, 1969– author. Title: The deficit myth : modern monetary theory and the birth of the people’s economy / Stephanie Kelton. Description: First edition. | New York : PublicAffairs, [2020] | Includes bibliographical references and index. Identifiers: LCCN 2019059417 | ISBN 9781541736184 (hardcover) | ISBN 9781541736207 (ebook) | ISBN 9781541757110 (international) Subjects: LCSH: Debts, Public—United States. | Budget deficits—United States. | Government spending policy—United States. | Fiscal policy—United States.

A similar breakthrough is needed for how we understand the deficit and its relationship to the economy. When it comes to increasing our public well-being, we have far more options than we realize, but we desperately need to see through the myths that have been holding us back. This book uses the lens of Modern Monetary Theory (MMT), of which I have been a leading proponent, to explain this Copernican shift. The main arguments that I present apply to any monetary sovereign—countries like the US, the UK, Japan, Australia, Canada, and others—where the government is the monopoly issuer of a fiat currency.1 MMT changes how we view our politics and economics by showing that in almost all instances federal deficits are good for the economy.


pages: 1,172 words: 114,305

New Laws of Robotics: Defending Human Expertise in the Age of AI by Frank Pasquale

affirmative action, Affordable Care Act / Obamacare, Airbnb, algorithmic bias, Amazon Mechanical Turk, augmented reality, Automated Insights, autonomous vehicles, basic income, battle of ideas, Bernie Sanders, Bill Joy: nanobots, bitcoin, blockchain, call centre, citizen journalism, Clayton Christensen, collective bargaining, commoditize, computer vision, conceptual framework, coronavirus, corporate social responsibility, correlation does not imply causation, Covid-19, COVID-19, cryptocurrency, data is the new oil, decarbonisation, deskilling, digital twin, disinformation, disruptive innovation, don't be evil, Donald Trump, Douglas Engelbart, effective altruism, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, finite state, Flash crash, future of work, Google Chrome, Google Glasses, high net worth, hiring and firing, Ian Bogost, independent contractor, informal economy, information asymmetry, information retrieval, interchangeable parts, invisible hand, Jaron Lanier, job automation, John Markoff, Joi Ito, Khan Academy, knowledge economy, late capitalism, Marc Andreessen, Mark Zuckerberg, means of production, medical malpractice, meta-analysis, Modern Monetary Theory, Money creation, move fast and break things, move fast and break things, mutually assured destruction, natural language processing, new economy, Nicholas Carr, Norbert Wiener, nuclear winter, obamacare, paradox of thrift, pattern recognition, payday loans, personalized medicine, Peter Singer: altruism, Philip Mirowski, pink-collar, Plutocrats, plutocrats, pre–internet, profit motive, QR code, quantitative easing, race to the bottom, RAND corporation, Ray Kurzweil, recommendation engine, regulatory arbitrage, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, self-driving car, sentiment analysis, Shoshana Zuboff, Silicon Valley, Singularitarianism, smart cities, smart contracts, software is eating the world, South China Sea, Steve Bannon, surveillance capitalism, TaskRabbit, technoutopianism, telepresence, telerobotics, The Future of Employment, Therac-25, Thorstein Veblen, too big to fail, Turing test, universal basic income, unorthodox policies, wage slave, Watson beat the top human players on Jeopardy!, working poor, Works Progress Administration, zero day

Fallis and Amy Brittain, “In Virginia, Thousands of Day-Care Providers Receive No Oversight,” Washington Post, August 30, 2014, https://www.washingtonpost.com/sf/investigative/2014/08/30/in-virginia-thousands-of-day-care-providers-receive-no-oversight/?hpid=z3&tid=a_inl&utm_term=.0a5aff61e742. 60. Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy (New York: Public Affairs, 2020). 61. L. Randall Wray, Modern Monetary Theory, 3d ed. (New York: Palgrave MacMillan, 2012). 62. Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (London: Penguin, 2018). 63. Kate Aronoff, Alyssa Battistoni, Daniel Aldana Cohen, and Thea Riofrancos, A Planet to Win: Why We Need a Green New Deal (New York: Verso, 2019). 64.

Third, they predict disaster for governments whose money creation is unmoored from the constraint of private demand for their debts. What the gold standard once did, the golden handcuffs of the bond market now achieve: ensuring that states only issue a stable amount of currency. Another approach, called modern monetary theory (MMT), aims to upend this common sense of money at every turn by emphasizing the power of governments relative to other institutions.60 A household cannot tax thousands of other households in order to support itself; government can. A household cannot print widely accepted money to pay for its expenses; governments that issue their own currencies can.

That taxation may be painful, but it is to be meted out, by and large, to those most able to spark inflation (those with the most money) or those most responsible for it. Sector-specific strategies also make sense. For example, requiring larger down payments for mortgages or taxing home sales can prick incipient housing bubbles. Modern monetary theory also has a broader theory of the particularity of inflation—that is, that at least in early stages, inflation is sparked in particular goods and services in particular markets. Focusing on those areas specifically can help avoid the disruptive effects of classic anti-inflation interventions, like the Volcker shock.


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

While disagreeing, rightly, with the notion that inflation targeting could deliver stability, Minsky would have appreciated the need, stressed by Mr Bernanke, for regulatory watchfulness and with the efforts of the Federal Reserve to rescue the economy from the crisis. He would have emphasized that the economy is now in a depression mode and will take a great deal of government-led effort to escape from a more severe crisis. All these are very important lessons, to be considered further in Chapter Eight. Lerner, Chartalism and Modern Monetary Theory A final school of thought, which is called ‘chartalism’ (from the idea that money is just a token, for which the Latin word is charta), argues that the conceptual failure of the contemporary monetary and fiscal orthodoxy is not that it gives too much room for central-bank or government discretion, but that it gives far too little: thus, it goes beyond Keynes and most Keynesians.49 The essential idea is that the purpose of monetary and fiscal policy is to ensure full employment.

., then these things in themselves are neither good nor bad, they are simply the means to the desired ends of full employment and price stability.’53 So long as these policies do not generate excess demand, there is no reason to fear their inflationary effects. This does not mean no constraint on monetary policy exists, but those constraints come from inflation and the associated risks of sharp declines in the value of the currency against other currencies. Today’s proponents of this set of ideas call it ‘modern monetary theory’.54 An essential point is that the private sector can be a net accumulator of financial assets if and only if the government runs a deficit or the economy as a whole runs a current-account surplus (that is, foreigners run a financial deficit). If the government runs a financial surplus in good times, as orthodox Keynesians propose, the private sector will, in the absence of a current-account surplus, run a financial deficit.

If the government runs a financial surplus in good times, as orthodox Keynesians propose, the private sector will, in the absence of a current-account surplus, run a financial deficit. The latter deficit will need to be financed by the creation of bank credit, which may ultimately prove destabilizing. A crucial and unquestionably correct point in modern monetary theory is this: banks do not lend out their reserves at the central bank.55 Banks create loans on their own, as already explained above. They do not need reserves to do so and, indeed, in most periods, their holdings of reserves are negligible. Only the central bank (by open-market operations), government (by spending and taxation) or private individuals (by reducing or increasing their holdings of cash) can change the aggregate level of bank reserves.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, borderless world, Bretton Woods, BRICs, business cycle, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, Dogecoin, eurozone crisis, fiat currency, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Herbert Marcuse, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kickstarter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, negative equity, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, Post-Keynesian economics, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

NEOCHARTALISM In essence, the “new” chartalists seek to combine elements of the work of Knapp and Mitchell-Innes with a theory of credit that places greater emphasis on the banking system. The leading exponent is the American economist, Randall Wray, whose approach is usually referred to as “modern monetary theory.” Wray’s work is premised on the “post-Keynesian” argument that the effective quantity of money within the economy is determined by its own internal dynamics: specifically, it is driven by the demand for credit.19 Wray’s version of this theory is “chartalist” because he places an especially strong emphasis on the role of the state, which can be summarized by the idea that taxes drive money.

A real Ponzi scheme takes fraud; Bitcoin, by contrast, seems more like a collective delusion.”36 Viewed simply as a currency, Bitcoin’s biggest pitfall is likely to be price deflation (and, in extremis, hyperdeflation), not inflation. This would be the conclusion reached about Bitcoin from the perspective of modern monetary theory, as discussed in Chapter 3. As the blogger “Lord Keynes” notes, “without relative price stability and an elastic supply, Bitcoins are not a viable monetary unit for any large capitalist system.”37 Although almost every monetary scholar would agree with the point about price stability, those of a more “Austrian” persuasion—not to mention the designers of Bitcoin themselves—would disagree about elastic supply: the Bitcoin software is designed to avoid such elasticity, which is regarded as a weakness of the fiat monetary system.

See also financial system; Wall Street system capitalist credit money, 108, 109 Carruthers, Bruce, 211–12 Carlyle, Thomas, 138 Casarino, Cesare, 222 Casascius coins, 364 cash, 1, 30n22, 36n, 38, 43, 117, 214, 286, 308; and anonymity, 227, 363, 366; as bullion, 97; versus credit, 62, 104; declining use of, 213n6; in Derrida, 183; and freedom, 227, 379; and hoarding, 128; in Keynes, 347; in Marx, 52, 54, 57, 58–59, 62, 66; in Minsky, 117–19; as the monetary base, 73; morality of, 96; and the quantity of money, 122n; as a safe haven, 88; and security, 227; as utopian, 96 cash nexus, 135 cash pools, 116 casino capitalism, 122, 132 Castells, Manuel, 221n12 castration complex, 150 Catchings, Waddill, 347 central banking, 13, 22, 44–46, 76–77, 116, 117, 213n7, 299; and bit gold, 353; and Bitcoin, 364, 371; and Bretton Woods, 70, 99, 245; and colonialism, 64; and confidence in money, 45; and the credit-debtor conflict, 109–10; and demand stimulus, 70; in the Eurozone, 107n, 129, 252, 254, 255, 261, 263, 265, 270; and financial crisis, 1–2, 4, 76–77, 127, 388; independence of, 20; and inflation, 132; in modern monetary theory, 107; and monetarism versus Keynesianism, 192; and monetary disturbances, 54n11, 70; and monetary governance, 69–70, 115, 246; and monetary policy, 121–22; in Proudhon, 352; and public debt, 217–18; and the sacred character of money, 46; and the state, 66n27, 96, 219; 378; and the treasury, 109; and war, 96.


pages: 242 words: 71,943

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity by Charles L. Marohn, Jr.

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, A Pattern Language, American Society of Civil Engineers: Report Card, bank run, big-box store, Black Swan, Bretton Woods, British Empire, business cycle, call centre, cognitive dissonance, complexity theory, corporate governance, Detroit bankruptcy, Donald Trump, en.wikipedia.org, facts on the ground, Ferguson, Missouri, global reserve currency, housing crisis, index fund, Jane Jacobs, Jeff Bezos, low skilled workers, mass immigration, Modern Monetary Theory, mortgage debt, Network effects, new economy, New Urbanism, paradox of thrift, Paul Samuelson, pensions crisis, Ponzi scheme, quantitative easing, reserve currency, salary depends on his not understanding it, Savings and loan crisis, the built environment, The Death and Life of Great American Cities, trickle-down economics, Upton Sinclair, urban planning, urban renewal, walkable city, white flight, women in the workforce, yield curve, zero-sum game

We have brought forward more than a generation of consumption capacity and, in a classic sense, should anticipate a generation of corrective sacrifice. Right on cue, a new experiment is starting to gain popularity, one that promises to rid us of the few remaining financial constraints. Called Modern Monetary Theory, it promises to deliver growth by embracing the abstract nature of a currency backed by nothing tangible. Under this concept, the centralized government can issue a nearly unlimited amount of currency to pay for whatever lawmakers prioritize. The only constraint is the capacity of workers to mobilize resources in response and our willingness to tax wealth when things go off the rails.

The only constraint is the capacity of workers to mobilize resources in response and our willingness to tax wealth when things go off the rails. Regardless of the economic religion one subscribes to – be it Keynesianism, supply-side monetarism, debt capitalism, freshwater economics, saltwater economics, New Keynesianism, or Modern Monetary Theory – the common denominator is the need for more growth as measured at the national level. Ultimately, this is what is broken. Does Growth Serve Us? The United States, and by extension most of the world, suffers from a tragic reversal. We once created growth in our economy because it served us.

., 103 Local government: changes in, to maintain economic stability, 105–106 debt taken on by, 113–114 funded by state government, 95 impact of infrastructure on, 79–80 profit run by, 37–38, 147 relationship of state and, 198 Long declines, 110–115 “Long emergency,” 110–111 Long Recession of the 1870s, 77 Los Angeles, California, xi Lovable places, 10 Low-risk investments, with steady returns, 150–155 Lydon, Mike, 158 M Maintenance: ability to keep up with, 109 cash-flow debt to cover, 188–192, 188f–190f of development projects, 52–57 of infrastructure, 46–49 need for constant, 151–154 in place-oriented government, 180–183 required for single-family homes, 112 Maintenance department, 179t Manhattan, New York, 24 Martenson, Chris, 108 Meaning, life of, 212–218 Middle class, 92, 93, 144–145 Milan, Italy, 164 Mills Fleet Farm, 134–137 Minicozzi, Joseph, 138–140, 161 “Minnesota Miracle,” 95 Mixed-use neighborhoods, 163, 169 Modern city development: as high-risk investments, 149 as lead by pubic investment, 34–35 productive places in, 131–134 Modern Monetary Theory, 99 Mortgages, during Great Depression, 88–89 Mouzon, Steve, 10, 113 Muskegon, Michigan, 161 N National Association of Home Builders, 136 National economy, local vs., 103 Natural disasters, 102–103 Neighborhoods: abandonment of, 109–110 built to finished states, 21–23 changing in post-war era, 92–93 community living in, 202–203 decline of, 113 gentrification of urban, 117 mixed-use, 163, 169 renewal of, and incremental growth, 23–27 responses to improvements in, 158 structured around religions, 214 in transition sections of Detroit, 118 Neighbors, being involved with, 202–203 New Deal economics, 87–88 New Orleans, Louisiana, 102, 182 Nixon, Richard, 94 Noncritical systems, 182 O Oak Cliff neighborhood (Dallas, Texas), 159 Obama, Barack, 63 Obesity, among Pacific Islanders, 58–59 Options Real Estate, 160 Orange County, California, xi–xii Order, chaos vs., 121–122 The Original Green (Mouzon), 10, 113 Oroville dam (California), 182 Oswego, New York, 152 Oswego Renaissance Association, 152 P Pacific Islanders, 58–59, 183–185 Paper returns on investment, 67–69 Paradox of Avarice, 104 Paradox of Thrift, 88, 104 Pareidolia, 8–9, 9f Parks department, 178t Party analogy, 34–35 A Pattern Language (Alexander), 8 Pension funds, 56–57, 70, 98 Pequot Lakes, Minnesota, 44–46 Perception, of need for more infrastructure, 63–65 Personal preferences, 144–145 Peru, 84 Place-oriented government, 171–198 and confirmation bias, 183–186 designed for efficiency, 174–176 focus on broad wealth creation by, 176–180 maintenance as priority for, 180–183 and regulations, 192–194 response to hardship by, 172–174 subsidiarity in, 195–198 understanding of debt by, 186–192 Political differences, 207 Pompeii, Italy, 5–10 Post-war boom: and economic stability, 91–93 modern city development established in, 12 Power, subsidiarity principle and, 196–198 Prayer of Saint Francis, 218 Prioritization, of maintenance, 180–183 Private development, 40 Private investment: private to public investment ratio, 129–130 public and, 30–34, 31f, 32f Private sector (businesses): response to economic hardship in, 172–173 small, see Small businesses Problem solving, 13–14 Productive places, 125–146 downtown vs. edge of town, 134–138 in past, 125–127 and personal preferences, 144–145 productivity calculations for, 128–130 return on investment, 141–144 traditional vs. modern development in, 131–134 value per acre, 138–141 Productivity, calculations of, 128–130 Project teams, 179–180 Property taxes, 49 Property value, 23–25, 25f Public health, and walking neighborhoods, 205 Public investment: private and, 30–34, 31f, 32f private to public investment ratio, 129–130 returns required for, 147 Public safety department, 179t Q Quality-of-life benefits, 187 Quantitative Easing, 99 R Railroad companies, 77 Rational decision making, 107–123 about failing development systems, 115–120 about long declines, 110–115 within complex, adaptive system, 120–123 and lack of single solution, 107–110 Real return on investment, 74–78 Redevelopment, financial productivity after, 131–134, 139–140, 139t Redundant systems, 182 ReForm Shreveport, 219, 220 Regulations: from place-oriented government, 192–194 and subsidiarity principle, 195–198 Repealing regulations, 192–193 Republican Party, 209 Request for proposal (RFP), 50 Residents, learning concerns of, 156–157 Resources: assumption of abundance of, 12–14 wasted, in modern development, 19 Retreats, strategic, 108–109 Return on investment, 141–144 calculating, for infrastructure, 67–69 for capital projects, 171–172 in cities, 44 and debt taken on by local governments, 187 low-risk investments with steady, 150–155 paper, 67–69 real, 74–78 social, 78–79 Revenues, and expenses, 41–44 RFP (request for proposal), 50 The Righteous Mind (Haidt), 208 Risk management strategies, 83–85 Roaring Twenties, 87 Roberts, Jason, 159 Roosevelt, Franklin, 87, 88 Rotary International, 203 S St.


pages: 357 words: 95,986

Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams

3D printing, additive manufacturing, air freight, algorithmic trading, anti-work, back-to-the-land, banking crisis, basic income, battle of ideas, blockchain, Boris Johnson, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, Cass Sunstein, centre right, collective bargaining, crowdsourcing, cryptocurrency, David Graeber, decarbonisation, deindustrialization, deskilling, Doha Development Round, Elon Musk, Erik Brynjolfsson, Ferguson, Missouri, financial independence, food miles, Francis Fukuyama: the end of history, full employment, future of work, gender pay gap, housing crisis, income inequality, industrial robot, informal economy, intermodal, Internet Archive, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, late capitalism, liberation theology, Live Aid, low skilled workers, manufacturing employment, market design, Martin Wolf, mass immigration, mass incarceration, means of production, minimum wage unemployment, Modern Monetary Theory, Mont Pelerin Society, neoliberal agenda, New Urbanism, Occupy movement, oil shale / tar sands, oil shock, patent troll, pattern recognition, Paul Samuelson, Philip Mirowski, post scarcity, post-work, postnationalism / post nation state, precariat, price stability, profit motive, quantitative easing, reshoring, Richard Florida, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Slavoj Žižek, social web, stakhanovite, Steve Jobs, surplus humans, the built environment, The Chicago School, The Future of Employment, Tyler Cowen: Great Stagnation, universal basic income, wages for housework, We are the 99%, women in the workforce, working poor, working-age population

Part of the reason for the rise of formalist approaches is precisely their fit with institutional requirements of higher education: they provided theories for researchers to spend time testing, textbooks and PhDs to continue a lineage of thought, and clear and transmissible principles.65 Today, the field has come to be dominated by neoclassical textbooks, and the result is that, even if professors want to pluralise the discipline, they do not have many accessible resources to hand.66 Indications that this might be changing include the creation of a heterodox textbook by two proponents of modern monetary theory.67 But more work needs to be done on this front in order to broaden the parochial horizons of mainstream economics. To support this process, there should be a movement to rejuvenate leftist economics. The dearth of economic analysis on the left could be seen in the wake of the 2008 crisis, when the most prominent critical response was a makeshift Keynesianism.

This recognition of the uses of quantitative methods does not mean simply adopting neoclassical models or slavishly following the dictates of numbers, but the rigour and computational elaboration that can come with formal modelling are essential for grappling with the complexity of the economy.71 However, from modern monetary theory to complexity economics, from ecological to participatory economics, trajectories of innovative thought are being launched – even if they remain marginal for now. Equally, organisations like the New Economics Foundation are leading the way in creating models of the economy that can inform leftist political goals, as well as fostering public literacy in economic matters.

., Pluralist Economics (London: Zed, 2008), pp. 1–2. 64.More information can be found on their website: rethinkeconomics.org. 65.David Colander and Harry Landreth, ‘Pluralism, Formalism and American Economics’, in Fullbrook, Pluralist Economics, pp. 31–5. 66.The most dominant textbook is by Greg Mankiw, a former Bush lackey and courageous defender of the 1 per cent: N. Gregory Mankiw, Macroeconomics, 8th edn (New York: Worth, 2012). 67.William Mitchell and L. Randall Wray, ‘Modern Monetary Theory and Practice’, 2014, pdf available at mmtonline.net. 68.For two brief but excellent exceptions, see Tiziana Terranova, ‘Red Stack Attack!’, in Mackay and Avanessian, #Accelerate. 69.For some of the existing research on this topic, see Oskar Lange and Fred M. Taylor, On the Economic Theory of Socialism (New York: McGraw-Hill, 1964); W.


pages: 288 words: 89,781

The Classical School by Callum Williams

bank run, banking crisis, basic income, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, complexity theory, Corn Laws, David Ricardo: comparative advantage, deindustrialization, Donald Trump, double entry bookkeeping, falling living standards, Fellow of the Royal Society, full employment, Gini coefficient, Gordon Gekko, greed is good, helicopter parent, income inequality, invisible hand, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, low skilled workers, Mahatma Gandhi, Martin Wolf, means of production, minimum wage unemployment, Modern Monetary Theory, new economy, New Journalism, non-tariff barriers, Paul Samuelson, Post-Keynesian economics, purchasing power parity, Ronald Coase, secular stagnation, Silicon Valley, spinning jenny, The Wealth of Nations by Adam Smith, Thomas Malthus, universal basic income

Milton Friedman, one of the most famous economists in living memory, said this of Hume’s theory of inflation: “We have advanced beyond Hume in two respects only: first, we now have a more secure grasp on the quantitative magnitudes involved; second, we have gone one derivative beyond Hume.” Robert Lucas, also an important economist in the 20th century, described two works published in 1752, Of Money and Of Interest, as the “beginnings of modern monetary theory”. And Friedrich Hayek noted that, along with Richard Cantillon, “David Hume began the development of modern monetary theory.”1 Hume was born in 1711 to a not especially rich family in Edinburgh. He entered the university around the age of 12 but found most of the lectures boring. In his twenties Hume told a friend that “there is nothing to be learnt from a Professor, which is not to be met with in Books”.

The other three were, reportedly, Alfred Marshall, Cournot and Walras. Schumpeter said this in a lecture, and was almost certainly doing so in order to surprise his students. 9. I am indebted to Fred Gottheil’s lucid explanation in the formulation of this paragraph. Chapter 6–David Hume (1711–1776) 1. To be clear, Hayek is not referring to “modern monetary theory”, often shortened to “MMT”, a theory about government spending and taxation that since the financial crisis of 2008–09 has become popular among many on the political left. 2. As of 2019 Britain’s debt-to-GDP ratio was around 85%. 3. For the idea used in this example I am indebted to Robert McGee. 4.


pages: 446 words: 117,660

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future by Paul Krugman

affirmative action, Affordable Care Act / Obamacare, Andrei Shleifer, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, bitcoin, blockchain, bond market vigilante , Bonfire of the Vanities, business cycle, capital asset pricing model, carbon footprint, Carmen Reinhart, central bank independence, centre right, Climategate, cognitive dissonance, cryptocurrency, David Ricardo: comparative advantage, different worldview, Donald Trump, Edward Glaeser, employer provided health coverage, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, frictionless, frictionless market, fudge factor, full employment, Growth in a Time of Debt, hiring and firing, illegal immigration, income inequality, index fund, indoor plumbing, invisible hand, job automation, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, large denomination, liquidity trap, London Whale, market bubble, market clearing, market fundamentalism, means of production, Modern Monetary Theory, New Urbanism, obamacare, oil shock, open borders, Paul Samuelson, Plutocrats, plutocrats, Ponzi scheme, price stability, quantitative easing, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, salary depends on his not understanding it, secular stagnation, Seymour Hersh, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, universal basic income, very high income, working-age population

Economics,” political conservatives prefer to get their advice from outright hacks rather than real researchers of any stripe. But the freshwater side did muddle the message. At a time when policymakers needed clarity about what needed to be done, what they heard was cacophony. Oh, and there’s one final article here about so-called Modern Monetary Theory. This is an odd doctrine, which is mostly just a special case of IS-LM (described in the previous section), with a few new confusions. But its proponents don’t know that; they think they’ve come up with profound, radical insights. And a few progressive politicians have been half-convinced; I try to unconvince them.

So what we’ve learned about economics these past two years is that many conservative economists were, in fact, willing to compromise their professional ethics for political ends—and that they sold their integrity for nothing. WHAT’S WRONG WITH FUNCTIONAL FINANCE? (WONKISH) February 12, 2019 The doctrine behind MMT was smart but not completely right Well, it looks as if policy debates over the next couple of years will be at least somewhat affected by the doctrine of Modern Monetary Theory, which some progressives appear to believe means that they don’t need to worry about how to pay for their initiatives. That’s actually wrong even if you set aside concerns about MMT analysis. But first it seems to me that I need to set out what’s right and what’s wrong about MMT. Unfortunately, that’s a very hard argument to have—modern MMTers are messianic in their claims to have proved even conventional Keynesianism wrong, tend to be unclear about what exactly their differences with conventional views are, and also have a strong habit of dismissing out of hand any attempt to make sense of what they’re saying.

., 147 mercantilism, 250 Merkel, Angela, 98 microeconomics, 407, 408 middle class: cutting benefits for, 30, 196, 309 and financial managers, 92–94 and income distribution, 266, 273 and income mobility, 277, 278 raising taxes on, 199 Mildenberger, Matto, 305, 306 Minskyism, 409 Mississippi, income inequality in, 291–92 Mnuchin, Steven, 322 moderation, instability of, 407–10 financial instability, 409–10 intellectual instability, 407–8 political instability, 408–9 Modern Monetary Theory (MMT), 125, 152, 154, 203 monetarism, 133, 409 monetary economics, 176 monetary policy, 128–29, 140, 143, 144, 153 money: conventional (currency), 412–14 cryptocurrency, 411–14 dollar cash holdings, 413 dollar notes, 413–14 fiat currencies, 414 speculative, 413 as store of value, 112 “Money and Morals” (Krugman), 260, 285–87 money managers, 92–94 money supply, central banks’ control of, 110, 112, 124, 133 “Monopolistic Competition and Optimum Product Diversity” (Dixit and Stiglitz), 396–98 monopoly power, 228, 236 monopsony power, 316–17 Moore, John, 147 Moore, Michael, 44, 45 Moore, Roy, 309 Moretti, Enrico, The New Geography of Jobs, 292 mortgage rates, 87 mortgages, subprime, 90–91, 136 “Most Important Thing, The” (Krugman), 327–28 motives, talk about, 8 Moulton, Seth, 76 movement conservatism, 297–98, 302–4, 307 definition of, 302 keeping zombie ideas alive via, 8 and Republican Party, 297, 299–301, 302, 368 and Tea Party, 303 white resentment as basis of, 343 “Movement Conservativism” (Krugman), 297–98 Moynihan, Daniel Patrick, 5 Mueller, Robert, 307 Mueller investigation, 360 Mulford, David, 405 Mulligan, Casey, 144 Mulvaney, Mick, 207, 225 Murdoch, Rupert, 297, 375 Murphy, Kevin, 279 Murray, Charles, Coming Apart: The State of White America, 1960–2010, 285–86 Mussolini, Benito, 346 “Myths of Austerity” (Krugman), 158, 160–62, 165 NAFTA, 372 NAIRU (non-accelerating-inflation rate of unemployment), 114 NASA, 163 National Association of Realtors, 84 National Climate Assessment, 332, 336 National Commission on Fiscal Responsibility and Reform, 198–200 nationalism, 343 National Older Women’s League, 198 National Review, The, 301 national security: and elections, 306 and tariffs, 251, 253, 255 NATO, 244 neoclassical economics, 132, 133, 139–40, 147 neoliberal ideology, 315 Netherlands, economy of, 184 New Deal, 107, 293, 308 New Geography of Jobs, The (Moretti), 292 New Hampshire, economic freedom in, 317, 317 New Jersey, health care in, 76, 78 New Keynesian views, 129, 139–40, 143, 145, 147 New York: health care in, 74, 318 infant mortality in, 317, 317 Medicaid expanded in, 318 New York Times, The, 348, 349 Nicaragua, and Iran-Contra, 300 Nimbyism, 291 Nixon administration, and media, 300 Nordhaus, William, 396 Norman, Victor, 398 “normative” economics, 1 Northam, Ralph, 308, 309 North Carolina: health care in, 77 Republican Party in, 359 Norway, economy of, 323 Obama, Barack: conservatives vs., 150, 208, 302, 320, 362 on health care, 53–55, 66, 339, 361 and international trade, 252 and taxes, 216, 219, 229 Obama administration: on debt and unemployment, 208 “hijacked” commission of, 198–200 and revenue growth, 225 stimulus plan of, 104, 107–8, 113–14, 115–17, 118–20, 131, 193, 206, 362 Obamacare, see Affordable Care Act O’Brien, Michael, 126 Ocasio-Cortez, Alexandria (AOC), 234, 236, 237, 320–21 Occupy Wall Street, 285 O’Connor, Reed, 367, 369 oil shocks, 126 Oklahoma, tax cuts in, 293 Okun’s Law, 113 oligarchy, 283, 349, 350 Olson, Mancur, The Logic of Collective Action, 354–55 Operation Coffee Cup (1961), 322 optimum currency areas, 177 Palin, Sarah, 54 Panama Papers, 349 Pangloss, Doctor (fict.), 135, 140 “paperclip maximizers,” 357 “Paranoid Style in American Politics, The” (Hofstadter), 346 parasites, 354–57 Paulson, Henry, 91 PBS Newshour, 169–71 Pelosi, Nancy: achievements of, 361–63 and Affordable Care Act, 35–36, 55, 361, 367 and financial reform, 362 as House Speaker, 76, 344, 362, 363 on “monstrous endgame,” 367, 369 on Social Security, 15, 35, 306, 361 and stimulus plan, 362 and trade agreement, 372 on the wall as “manhood thing,” 370 Pence, Mike, 73 pensions: defined benefit, 14 defined contribution, 14–15 401(k)-type plans, 31–32 private, decline of, 31–32 Perlstein, Rick, 302, 354, 355 Perot, H.


pages: 199 words: 64,272

Money: The True Story of a Made-Up Thing by Jacob Goldstein

"side hustle", Antoine Gombaud: Chevalier de Méré, back-to-the-land, bank run, banks create money, Bear Stearns, Berlin Wall, Bernie Sanders, bitcoin, blockchain, break the buck, card file, central bank independence, collective bargaining, coronavirus, COVID-19, cryptocurrency, David Graeber, Edmond Halley, Fall of the Berlin Wall, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, index card, invention of movable type, invention of writing, Isaac Newton, life extension, M-Pesa, Marc Andreessen, Martin Wolf, Menlo Park, Mikhail Gorbachev, mobile money, Modern Monetary Theory, money market fund, probability theory / Blaise Pascal / Pierre de Fermat, Ronald Reagan, Ross Ulbricht, Satoshi Nakamoto, Second Machine Age, Silicon Valley, software is eating the world, Steven Levy, the new new thing, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, transaction costs

Or maybe, she suggested, we can just spend the money and not worry about how to pay for it. She wasn’t being glib; she was drawing on a weird new way of thinking about money that had quietly been gathering steam for decades and was suddenly everywhere (or at least everywhere money nerds gathered). It’s called Modern Monetary Theory, and while its intellectual roots go back a century or so, we can start the story in the early 1990s when a hedge fund manager named Warren Mosler flew to Rome to meet with the Italian finance minister. Mosler had recently noticed that he could borrow money (Italian lira) from Italian banks and turn around and lend it to the Italian government for a higher interest rate.

Almost nobody read the paper. Mosler spent decades in the wilderness (and by wilderness, I mean the Caribbean, where he lived, in part, to avoid paying taxes). He funded a few fringe economists who were working on similar ideas, and who came up with a name for this way of looking at the world: Modern Monetary Theory, or MMT for short. In the mid-’90s, a young economist named Stephanie Kelton studied at one of the programs funded by Mosler. She was interested but skeptical. She wanted to understand how government spending really worked. Not the theory, but the thing itself. She spent months studying the arcane details—reading Fed manuals, talking to people whose job was to move money in and out of government accounts at the Treasury Department.


pages: 424 words: 119,679

It's Better Than It Looks: Reasons for Optimism in an Age of Fear by Gregg Easterbrook

affirmative action, Affordable Care Act / Obamacare, air freight, autonomous vehicles, basic income, Bernie Madoff, Bernie Sanders, Branko Milanovic, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, coronavirus, David Brooks, David Ricardo: comparative advantage, deindustrialization, Dissolution of the Soviet Union, Donald Trump, Elon Musk, Exxon Valdez, factory automation, failed state, full employment, Gini coefficient, Google Earth, Home mortgage interest deduction, hydraulic fracturing, Hyperloop, illegal immigration, impulse control, income inequality, independent contractor, Indoor air pollution, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Watt: steam engine, labor-force participation, liberal capitalism, longitudinal study, Lyft, mandatory minimum, manufacturing employment, Mikhail Gorbachev, minimum wage unemployment, Modern Monetary Theory, obamacare, oil shale / tar sands, Paul Samuelson, peak oil, Plutocrats, plutocrats, Ponzi scheme, post scarcity, purchasing power parity, quantitative easing, reserve currency, rising living standards, Robert Gordon, Ronald Reagan, self-driving car, short selling, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, Steve Wozniak, Steven Pinker, supervolcano, The Chicago School, The Rise and Fall of American Growth, the scientific method, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, transaction costs, uber lyft, universal basic income, War on Poverty, Washington Consensus, WikiLeaks, working poor, Works Progress Administration

Tomorrow has a way of coming. Some economists view debt as an outdated concern. A school of thought called “modern monetary theory” contends that the hard-currency nations (Australia, Canada, the European Union, Japan, Singapore, Switzerland, the United Kingdom, and the United States) can borrow as much as they want and print money to make the payments. More precisely, they can declare additional ones and zeroes to make the payments. Maybe this theory is sound. Running the experiment to find out if modern monetary theory is correct would involve gambling with the bankruptcy of the Western world. Among political strategists, the saying is, “Debt doesn’t poll.”

., on, 67 coal mining and, 61, 76–77, 233 collapse anxiety and, 68 communism and, 174 comparative advantage and, 79–80 control and, 65–66 currency and, 69 democracy and, 167–168, 170, 173–174, 193 Dodd-Frank Act and, 92–93 education and, 169 fascism and, 66 Feldstein on, 91 globalization and, 82 golden age of, 69–70 Great Recession and, 64, 68, 97 inequality and, 84–85 inflation and, 87 infrastructure and, 93–95 Keynes on, 98–99 marriage and, 267, 268 media negativity and, 77, 79, 87–88 modern monetary theory and, 96 Panasonic and, 68–69 paper mills and, 78–79 Piketty on, 84–85 predictions and, 64 pretax income and, 84–85, 91 regulations of, 92–93 retirement economics, 31, 273–274 slow growth and, 90–92 Soviet and American, 167 state pension accounts and, 97–98 trade boosting, 79, 245–246 Trump and, 70–71 US domestic production and, 77–78 US GDP and, 84, 90–91 war and, 93, 132–134 Washington Consensus and, 66–67 Western living standards and, 88 See also market economy; middle class, US; national debt, US education, 280 book reading and, 271 in China, 170 college as, 269–271 democracy and, 169–170 disability and, 37 economy and, 169 immigrants and, 269–270 jobs and, 89–90 longevity and, 37–38 marriage and, 267 public school system and, 38, 269 skilled trades and, 270 wage and, 89–90 The Education of Henry Adams (Adams), 197, 198 Ehrlich, Paul, 5 elections.


Where Does Money Come From?: A Guide to the UK Monetary & Banking System by Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson

bank run, banking crisis, banks create money, Basel III, Big bang: deregulation of the City of London, Bretton Woods, business cycle, capital controls, cashless society, central bank independence, credit crunch, double entry bookkeeping, en.wikipedia.org, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, Hyman Minsky, inflation targeting, interest rate derivative, interest rate swap, Joseph Schumpeter, low skilled workers, market clearing, market design, market friction, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Northern Rock, offshore financial centre, Post-Keynesian economics, price mechanism, price stability, purchasing power parity, quantitative easing, Real Time Gross Settlement, reserve currency, Ronald Reagan, seigniorage, special drawing rights, the payments system, trade route, transaction costs

The country banks issued paper notes of various types and qualities which were discounted (i.e. exchanged for Bank of England notes or credit entries in banks’ accounts with the Bank of England) at relatively low rates of interest.83 Despite the Bank of England’s notes being linked to gold, currency and banking crises remained frequent and inflation rampant. A great debate began between two schools of thought over how best to solve the problem, a debate which continues to this day in modern monetary theory.* The Bullionist (later ‘Currency’) school claimed that rising prices were the fault of the Bank of England for discounting too great a volume of bills issued by private banks. Convinced of the intrinsic value and stability of gold (the commodity theory of money – Section 2.2), they called for the return of full convertibility of bank-note issuance to gold reserves.

INDEX A | B | C | D | E | F G | H | I | K | L | M N | O | P | Q | R | S T | U | V | W allocation, credit 105, 106, 109, 111, 141 anti-Bullionist school 43 Article 101 EC 118 Asset Purchase Facility see Quantitative Easing Babylon 34 bank accounts balances 15, 16 customers’ ownership of money in 11-12 government 153 importance of 138 Bank Charter Act 1833 43 Bank Charter Act 1844 43-5 bank deposits 15, 17, 20-1 Bank of England bank deposits, quotes about 17 bank reserves, control of 19 commercial bank money, little control over 21-2 creation of 41, 42 credit creation for public spending 143-4 demand-driven interest rates 150-1 effecting the market rate of interest 77 electronic money creation 14 foreign exchange reserves 160 Lender of Last Resort 24, 97, 103, 138 LIBOR and 70-1, 83n, 102 money supply 6, 20 Moral Suasion 47 regulation of credit 24 regulation of wider range of financial institutions 49 repurchasing agreements (repos) 78-9, 101 standing facilities 79-80 supply-driven interest rates 150-1 see also cash; central bank money; central bank reserves; liquidity Bank of International Settlements 61 Bank of Japan 80-1, 104, 112 banking central see Bank of England commercial see commercial banks confusion around 11 crises 42-3, 45 earliest systems 34-5 lending 7 liability 11-12, 16, 62, 63, 85, 106 misconceptions of 7 modern, origins of 37-42 online 52-3 perceptions of 11-14 reform, questions to consider 141-2 see also clearing system Banking school 43 banknotes liquidity of 60 sale of 72-4 bartering 29, 30, 32, 32n base money see central bank money Basel Committee on Banking Supervision (BCBS) 52, 93-4, 95 Bernanke, Ben 81n bilateral netting 165 bilateral settlement 64 Bills of Exchange 37, 38n, 137 bonds government 41, 78, 118, 120, 122, 124-5 issuance of 37, 40-2 liquidity of 60 purchase operations 81 Bradbury bills 45-6 Bretton Woods agreement 46, 50 broad money 48, 51, 60-1 building societies 16 Bullionist school 42-3, 44 capital equity 84-5, 87-8, 94 forms of 84 minimum levels required of banks 93-5 own 84, 85, 93-4 retained earnings 93-4 capital adequacy effect on bank credit creation 95 levels 100, 140 leverage ratios 96-7, 97n rules 93-5 capital flows, international 50, 52, 127-33 capitalism 32, 61, 137-8 cash decline in use of 52-3 definition 6, 14 on demand 71, 72 sale of banknotes 72-4 central bank see Bank of England central bank money banks’ liquidity requirements 74-5 comparison with commercial bank money 75-7 definition 6, 14, 60 ratio to commercial bank money 22, 75 central bank reserves definition 6, 14-15 economic growth, little impact on 22 intangibility 67 interbank payments 64-71, 102 lending to commercial banks 21 liquidity for clearing system 65 liquidity of 60 Chartalism 35, 36 Chinese economic reforms 111-12 classical economics 30-1 clearing system Bank of England 64-5 clearing banks 48-9 early banking systems and 34-5 electronic payments 16, 64 goldsmiths 38 interbank 68-9 ratio of reserves held 7 Cobbett, William 44 coinage exchange rates 45 holders and exchangers of 37 silver 37 value of 36 commercial bank money comparison with central bank money 75-7 definition 6, 15 liquidity of 60 modern, creation of 40 ratio of money in circulation 52-3 ratio to base money 22 supply, no limits to 23-4 commercial banks bank accounts with Bank of England 64-5 business loans 106, 107-8 confidence of 23-4, 140 corridor system of reserve targets 83n, 99, 150-1 credit controls 47 credit creation 6, 62-4 credit lending criteria 7-8 credit rationing 105-10 definition 13 deposits 6 determining quantity of central bank reserves 7, 21 fear of insolvency 23-4, 24 financial intermediaries 12-14, 19 IOUs see liability lending criteria 7-8 LIBOR and 70-1, 83n, 102 money creation see money creation mortgages 107 profits 87, 94 regional 42, 43-4 shadow banking 101-2 ‘special profit’ from interest on credit 74 see also capital; credit; liquidity; money creation commodity theory of money 30-3 Competition and Credit Control (CCC) 49-50, 98 compulsory cash-reserve requirements 21 compulsory reserve ratios 98 computer money 14 Consolidated Fund 153-4 Consolidated Fund Extra Receipts (CFERs) 153n Continuous Linked Settlement (CLS) Bank 165-6, 168 corridor system 83n, 99, 150-1 country banks 42, 43-4 crawling pegs 130 credit credit creation see credit creation deregulation of controls on 48-52 direct regulation of 24, 96, 110-12 lending criteria 7-8 leverage ratios 96-7, 97n rationing 105-10 see also Competition and Credit Control (CCC); goldsmiths credit creation allocation 105, 106, 109, 111, 141 bank lending 6 booms 49-50, 51 capital adequacy rules 93-5 fiscal policy links 126-7 liquidity regulation 97-100 money as 34 money created by banks 62-4 quantity theory of 109-10 window guidance 111-12 see also money creation; productive credit creation; unproductive credit creation credit theory of money 33-4 credit unions 16 crowding out 124-6 currency bands 130 Currency school 42-3 currency swaps 162 Davies, Glynn 34, 46, 50 Debt Management Account (DMA) 154-7 Debt Management Office (DMO) 122, 124, 154, 155n, 156 debts 34-5 declining marginal utility 106 deductive reasoning 33n Defoe, Daniel 10 deposits bank 15, 17, 20-1 commercial banks creation of 7 demand 15, 43-4, 64, 65, 138 facilities 79 insurance 76-7 rates 150 receipts 34, 37, 38, 39, 40 deregulation 48-52 digital money 52-3 Discount Window Facility 84 double-entry bookkeeping 63 East Asian Economic Miracle 111-12 electronic money 14, 52-3, 67 endogenous money 103-4, 106, 109 equation of exchange 31n equity capital 84-5, 87-8, 94 eurodollars 50 European Central Bank (ECB) 52, 120-1 European Union (EU) 118-21 eurozone economies 120-1, 132-3 Exchange Equalisation Account (EEA) 158-60 exchange rates foreign 127-33, 158-60, 161, 162-8 government intervention 130-2 regimes 45-53, 129-30 Exchequer Pyramid 153, 154, 156 exogenous money 103-4, 109 Federal Reserve Bank of Chicago 44 Ferguson, Niall 28, 36 financial crisis eurozone 120-1 key questions raised 5-6 North Atlantic 29 originate and distribute model of banking 100-1 as a solvency and liquidity crisis 102-3 subprime mortgages 101, 138 Financial Services Authority (FSA) 99 Financial Services Compensation Scheme (FSCS) 16, 76 fiscal policy see Government Fisher, L. 31n floating currency regimes 130 floor system 152 foreign exchange eurozone 132-3 government intervention 130-2 markets 127-9 payment system 162-8 regimes 129-30 reserves 158-60 trade and speculation 161 transactions 162 foreign interest rate swaps 162 forex transactions 162-8 forwards (forex transaction) 161, 162 fractional reserve banking 7, 37, 38-40, 44 Galbraith, Professor J.K. 58, 146 GDP transactions 24, 51-2, 83, 96, 109-10, 125-6 see also productive credit creation general equilibrium 32 Gilt Edged Market Makers (GEMMs) 122-3, 156 gilts 41, 82, 155-6 gold standard 45-7 Gold Standard Act 1925 46 Golden Period 45 goldsmiths 37, 38-9, 40 Goodhart’s law 61, 138 Government bank accounts 153-60 bonds 41, 78, 118, 120, 122, 124-5 borrowing 122-3, 124-6 intervention to manage exchange rates 130-2 linking fiscal policy to credit creation 126-7 monetary policy 42-5, 47, 49-50, 120-1, 141-2 money creation, bypassing restrictions 119-20 money creation, EU restrictions on 117-19 money-financed fiscal expenditure 144-5 money supply, effect of borrowing on 124-6 productive investment 125-6 spending 123-4 taxation 35-6, 41, 121, 139, 140 Government Banking Service 156 gross non-payment versus payment settlement method 163-4 hedging 161 Herstatt risk 164 high-powered money see central bank money hire purchase houses 48 ICP/Cobden Centre poll 11, 12 imperfect information 7, 105, 107, 140 see also perfect information Impossible Trinity 131-2 Independent Commission on Banking 13 Ingham, Geoffrey 119 Innes, Mitchell 35 insolvency explanation of 86, 87 protection against 93-7 see also solvency interest compound 39 debt, interest-bearing 144-5 legalisation of 41 savings accounts 12 interest rates crowding out 124-6 foreign rate swaps 162 government debt 119 interbank rate 102, 150, 152 LIBOR 70-1, 83n, 102 margin 12 market rate 50, 77 monetary policy and 80-1 negative 80 policy rate 50, 79, 150 intra-day clearing 68 investment banking 13 investors bonds 40-1 government 126 private 125 IOUs see liability Keynes, John Maynard 4, 33, 71 lending cycles of 18-19 facilities 79-80 fractional reserve banking 7, 37, 38-40, 44 rates 150 leverage ratios 96-7, 97n liability 11-12, 16, 62, 63, 85, 106 LIBOR 70-1, 83n, 102 liquidity Bank of England influence on 78 crisis 86-7 Discount Window Facility 84 expectations, centrality to 138-9 financial crisis and 102-3 regulation of 97-100 solvency and 84-7 loans Bank of England influence on 77 business 106, 107-8 central bank 65-6, 78-9 central bank reserves 78-9 commercial banks 6 confidence in borrower to repay 20-1, 140 credit unions 16 in economic downturn 71 goldsmiths 38 maturity transformation 12 risk rating 94 secured 106-7 securitisation 100-1 M0 see central bank money M1, broad money 60 M2, broad money 61 M3, broad money 61 M4, broad money 15, 61 Maastricht Treaty 118-19 margin 12 marginal utility 31-2 market-makers 155 Marx, Karl 32, 39 maturity transformation 12 McKenna, Reginald 4 medium of exchange 29, 35, 38, 52, 139 Mill, John Stuart 30 Minimum Lending Rate (MLR) 50 Minsky, Hyman 33 Modern Monetary Theory (MMT) 121n monetary policy early 42-5 government reforms 49-50 politics of 120-1 reform, questions to consider 141-2 review of 47 Monetary Policy Committee (MPC) 79, 150 money acceptability of 139-40 commodity theory of 30-3 credit theory of 33-4 definition 6, 138-9 efficiency of exchange 30 emergence of modern money 137-8 endogenous 103-4, 106, 109 exogenous 103-4, 109 functions of 29 as information 67 local currency 145-6 marginal utility 31-2 money creation see money creation neutrality of 30-2 role of state in defining 35-7 as social relationship 33-4, 139-40 see also cash; money creation money creation allocation of 105, 106, 109, 111, 141 capital adequacy ratios 95 commercial banks and 6, 61, 64, 139-40 confidence of banks 23-4 creation of, misunderstanding 5 endogenous and exogenous money 103-4, 106, 109 implications for economic prosperity and financial stability 7-8 link to central reserves 7 multiplier model 18-21 securitisation 100-1 shadow banking 101-2 see also credit; Quantitative Easing money supply Bank of England measures of 60-1 control of 20, 48 definition 15 effects on 71 expansion by governments 145 money creation creation see credit; money creation overview 6 money tax 74 Mosler, Warren 36 multiplier model 18-21 national currency 6 National Loans Fund (NLF) 154, 158 National Savings and Investments (NS&I) 154, 158 neoclassical economics 31-4, 51 new money see money creation non-GDP transactions 24, 109 non-PVP method 163-4 Northern Rock 103 Open Market Operations (OMOs) 78, 79, 151 Operational Lending Facility 79-80 options (hedging) 161, 162 orthodox economics 31-4 Outright Monetary Transactions (OMTs) 121 own capital 84, 85, 93-4 payment versus payment (PVP) systems 165-6, 167, 168 pegged exchange rate regimes 130 perfect information 31, 32, 77, 105 see also imperfect information policy rate 50, 79, 150 productive credit creation 24, 111, 142 see also GDP transactions promissory notes 37, 38 Promissory Notes Act 1704 40, 42 PVP systems 165-6, 167, 168 Quantitative Easing (QE) Bank of England 81 bond purchases 81 definition 80-1 effect on economy 82-3 financial assets, purchase of 152 lending, impact on 22, 23 Quantity Theory of Credit 24n, 51, 109-10, 141 real time gross settlement (RTGS) 76, 79 repurchasing agreements (repos) 78-9, 101 reserve accounts 64-5 reserve ratios 19, 20, 21, 49, 51, 98 reserve targeting 150-1 residential mortgage-backed securities (RMBSs) 100-1 retail banking 13 risk management systems 94 safe-deposit boxes 11 savings, investment of 12-13 savings accounts 60 Schumpeter, Joseph 10, 30-1 secondary banking crisis 1974 50 securities 40-1 securitisation 100-1 seigniorage 74 settlement 29, 59, 64, 76, 128n, 162-3, 167-8 shadow banking system 101-2 Simmel, Georg 28 solvency financial crisis and 102-3 regulation of 84-7 see also insolvency; liquidity speculators 161 spots (forex transaction) 162 sterling stock liquidity regime (SLR) 98-100 store of value 29, 33 subordinated debt 85 subprime mortgages 101, 138 supply and demand 31 T-accounts 63 tally sticks 34-5, 41 taxation 35-6, 41, 121, 139, 140 textbook model 18-21 traditional correspondent banking 163-4 Treaty of Maastricht 118-19 Tucker, Paul 21, 106 unit of account 29, 35, 36, 139 unproductive credit creation 24, 111 see also GDP transactions; productive credit creation On Us, with and without settlement risk 167 USA, gold standard 46-7 usury see interest value, measurement of 35 Walras, Leon 31 Ways and Means Advances 117n Wergeld 35 Werner, Richard 44, 81n, 109-10 wholesale banking 13 wholesale money markets 50 window guidance 111-12 WIR credit-clearing circle 145 * ‘Central bank money in the UK economy takes two forms: banknotes and banks’ balances with the Bank of England (reserves).


pages: 611 words: 130,419

Narrative Economics: How Stories Go Viral and Drive Major Economic Events by Robert J. Shiller

agricultural Revolution, Albert Einstein, algorithmic trading, Andrei Shleifer, autonomous vehicles, bank run, banking crisis, basic income, bitcoin, blockchain, business cycle, butterfly effect, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, central bank independence, collective bargaining, computerized trading, corporate raider, correlation does not imply causation, cryptocurrency, Daniel Kahneman / Amos Tversky, debt deflation, disintermediation, Donald Trump, Edmond Halley, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, full employment, George Akerlof, germ theory of disease, German hyperinflation, Gunnar Myrdal, Gödel, Escher, Bach, Hacker Ethic, implied volatility, income inequality, inflation targeting, invention of radio, invention of the telegraph, Jean Tirole, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, litecoin, market bubble, Modern Monetary Theory, money market fund, moral hazard, Northern Rock, nudge unit, Own Your Own Home, Paul Samuelson, Philip Mirowski, Plutocrats, plutocrats, Ponzi scheme, publish or perish, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, Rubik’s Cube, Satoshi Nakamoto, secular stagnation, shareholder value, Silicon Valley, speech recognition, Steve Jobs, Steven Pinker, stochastic process, stocks for the long run, superstar cities, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, traveling salesman, trickle-down economics, tulip mania, universal basic income, Watson beat the top human players on Jeopardy!, We are the 99%, yellow journalism, yield curve, Yom Kippur War

The narrative can be spotted by searching for the words “Laffer curve” (see Figure 5.1). There are two epidemic-like curves (not to be confused with the Laffer curve itself) in succession, the first rising until the early 1980s, the second rising after 2000, when it became involved with another narrative justifying government deficits, associated with the words “modern monetary theory.” The Laffer curve looks like a simple diagram from an introductory economics textbook, with one important difference: it is very famous among the general public. The curve, which takes an inverted U-shape, relates national income tax revenue to the rate at which income is taxed, taking account of the fact that higher tax rates make people work less, thus decreasing national income.

., 73, 198, 281 metanarrative, 92 metaphors, 16, 17; of economy as sick or healthy, 79 meteorology narratives, 123 Metropolis (film), 203 Mexican Americans, deported during Great Depression, 190 Michel, Jean-Baptiste, 24 Milosz, Czeslaw, 57 Mitchell, Wesley C., 125, 309n10 Mitterrand, François, 42 “modern monetary theory,” 42 Modern Times (film), 195 modesty narrative: absent from George and Veblen works, 310n1; in Japanese “lost decades,” 150; present decline in, 272 modesty narrative of Great Depression: bicycle craze and, 143; blue jeans and, 147–48; conspicuous consumption and, 135, 136–37, 139, 142–45; decline in, 150 Modigliani, Franco, 301n13 Mokyr, Joel, 71 Moley, Raymond, 114 Monetary History of the United States (Friedman and Schwartz), 73, 132–33 monetary policy: causal impact on aggregate economy, 73; studies of narratives to infer motivations of, 281; wage-price spiral narrative and, 261 monetary system: inflation and, 262; typical American’s confusion about, 170 monetary theory: invoked by bimetallism and Bitcoin, 22; “modern monetary theory” narrative, 42 money narratives, 173.

., 125, 309n10 Mitterrand, François, 42 “modern monetary theory,” 42 Modern Times (film), 195 modesty narrative: absent from George and Veblen works, 310n1; in Japanese “lost decades,” 150; present decline in, 272 modesty narrative of Great Depression: bicycle craze and, 143; blue jeans and, 147–48; conspicuous consumption and, 135, 136–37, 139, 142–45; decline in, 150 Modigliani, Franco, 301n13 Mokyr, Joel, 71 Moley, Raymond, 114 Monetary History of the United States (Friedman and Schwartz), 73, 132–33 monetary policy: causal impact on aggregate economy, 73; studies of narratives to infer motivations of, 281; wage-price spiral narrative and, 261 monetary system: inflation and, 262; typical American’s confusion about, 170 monetary theory: invoked by bimetallism and Bitcoin, 22; “modern monetary theory” narrative, 42 money narratives, 173. See also Bitcoin narrative; gold standard narrative money supply: gold discoveries of 1897 to 1914, 73; Great Depression and, 132–33 moral dimensions of economic narratives, 80; abstract economic forces and, xvii; American Dream narrative and, 155; anger at business and, 239; annoyance with boycotts and, 241; concerns about labor unions and, 258; databases of sermons relevant to, 284–85; frugality during Great Depression and, 143; opposing pairs of narrative constellations and, 113; Roosevelt’s Depression fireside chat and, 129, 278; about stock market crash of 1929, 235–36; wage-price spiral narrative and, 261–62, 266 morality in historical narrative, 37 Morgan, J.


pages: 82 words: 24,150

The Corona Crash: How the Pandemic Will Change Capitalism by Grace Blakeley

asset-backed security, basic income, bond market vigilante , Bretton Woods, business cycle, capital controls, central bank independence, coronavirus, corporate governance, Covid-19, COVID-19, creative destruction, credit crunch, crony capitalism, debt deflation, decarbonisation, deindustrialization, don't be evil, financial deregulation, Francis Fukuyama: the end of history, full employment, gig economy, global pandemic, global value chain, income inequality, informal economy, invisible hand, Jeff Bezos, liberal capitalism, light touch regulation, Martin Wolf, Modern Monetary Theory, moral hazard, move fast and break things, move fast and break things, Network effects, North Sea oil, Northern Rock, offshore financial centre, pensions crisis, Philip Mirowski, price mechanism, quantitative easing, regulatory arbitrage, rent control, reshoring, savings glut, secular stagnation, shareholder value, structural adjustment programs, too big to fail, universal basic income, unorthodox policies, Washington Consensus, yield curve

: Neoliberalism and Winners and Losers of International Debt Crises’, Loyola University Chicago Law Journal 42, no. 4 (2011): 668–83; Adam Tooze, ‘Notes on the Global Condition: Of Bond Vigilantes, Central Bankers and the Crisis, 2008–2017’, adamtooze. com, 7 November 2017. 24 ‘Fears Grow over Bangladesh’s COVID-19 Response’, Al Jazeera, 23 March 2020. 25 Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, New York: PublicAffairs/Perseus, 2020. 26 Mahir Binici and Mehmet Yörükoğlu, ‘Capital Flows in the Post-Global Financial Crisis Era: Implications for Financial Stability and Monetary Policy’, BIS Working Papers 57, Basel: Bank for International Settlements, 2015, 319–43. 27 Gabriel Chodorow-Reich, ‘Effects of Unconventional Monetary Policy on Financial Institutions’, Brookings Papers on Economic Activity, The Brookings Institution, vol. 48, no. 1 (Spring 2014): 155–227. 28 Martin Mühleisen and Mark Flanagan, ‘Three Steps to Avert a Debt Crisis’, IMF Blog, 18 January 2019, blogs. imf.org. 29 ‘The Great Lockdown: Worst Economic Downturn Since the Great Depression’, IMF press release, no. 20/98, 23 March 2020. 30 Nick Dearden, ‘The Global South’s Coronavirus Debt Crisis’, Tribune, 10 May 2020, tribunemag.co.uk. 31 Rehman Sobhan, ‘Structural Maladjustment: Bangladesh’s Experience with Market Reforms’, Economic and Political Weekly 28, no. 19 (8 May 1993): 925–31. 32 Amy Kazmin, ‘Modi the Reformer Reappears as Coronavirus Hits India’s Economy’, Financial Times, 15 May 2020. 33 See IMF, Policy Responses to Covid-19: Policy Tracker, Washington, DC: International Monetary Fund, 2020. 34 Ibid. 35 UNCTAD, Digital Economy Report 2019: Value Creation and Capture: Implications for Developing Countries, Geneva: United Nations Conference on Trade and Development, 2019. 36 A global debt jubilee was partially achieved in 2000, when the Jubilee Debt Coalition – a network of charities and religious organisations – pressured the UK government to write off a substantial portion of the debts owed to it by Global South states.


pages: 87 words: 25,823

The Politics of Bitcoin: Software as Right-Wing Extremism by David Golumbia

3D printing, A Declaration of the Independence of Cyberspace, Affordable Care Act / Obamacare, bitcoin, blockchain, Burning Man, crony capitalism, cryptocurrency, currency peg, distributed ledger, Dogecoin, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, Extropian, fiat currency, Fractional reserve banking, George Gilder, Ian Bogost, jimmy wales, litecoin, Marc Andreessen, Modern Monetary Theory, Money creation, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, new economy, obamacare, Peter Thiel, Philip Mirowski, risk tolerance, Ronald Reagan, Satoshi Nakamoto, seigniorage, Silicon Valley, Singularitarianism, smart contracts, Stewart Brand, technoutopianism, The Chicago School, Travis Kalanick, WikiLeaks

Indeed, the story told so far has if anything tilted the story too much in Bitcoin’s favor. For while the textbook account of money includes the three critical functions we have mentioned, the majority of expert economic theory simply defines money as currency that is issued by a sovereign government. This theory is known as “Modern Monetary Theory” (MMT) or “neochartalism” and has its roots in economics going back at least to John Maynard Keynes, whose views have perpetually been a major target for every sort of attack from right-wing thinkers. According to this view, the difference between money and currency is that money is currency issued by the state and indicates the form of currency in which taxes must be paid.


Money and Government: The Past and Future of Economics by Robert Skidelsky

anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Bear Stearns, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, market clearing, market friction, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, mobile money, Modern Monetary Theory, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, placebo effect, price stability, profit maximization, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

Reciprocal obligations could be discharged by tokens of purchasing power, rather than by actual transfers of physical goods, the tokens expressing customary valuations of the physical obligations. If this model of the earliest economies is accepted, the origin of money is related primarily to the operations of public finance, not of markets. Promises come before coins: coins are merely tokens of promises. Neo-chartalists of ‘modern monetary theory’, such as Warren Mosler and Randall Wray, go further: the state doesn’t need to tax in order to spend; it needs to spend in order to tax. Neo-chartalists tantalize you with such questions as: how can you pay taxes if the government has not already spent the money? The state’s debts are the source of its revenue: the more it spends the more revenue it can collect.

(But then there would be no government either!) But it does 246 t h e di s a bl e m e n t of f i s c a l p ol ic y not follow that the money it spends automatically returns to it as tax revenue. As Anwar Shaikh rightly notes: ‘There is no such thing as a money of no escape.’55 The value of modern monetary theory is not in trying to prove that government can issue debt without limit, but in emphasizing that the ‘bonds of revenue’ are far looser than the deficit hawks claim. 247 9 The New Monetarism ‘The government’s real case is that expansionary monetary policy will offset any contractionary influence of the Budget.’

Currency School vs Banking School debate, 44, 49–50 during economic deterioration (1969–73), 165 Fed’s ‘Reserve Position Doctrine’ (1920s), 103–4 and financing of deficit, 245, 246–7, 285 four key monetary debates, 40 and Friedman, 104–6, 177–83, 205–8 and Great Depression, 104–6, 183 ‘hard’ and ‘soft’ money schools, 39, 39, 41–2, 44 during Keynesian full employment phase (1945–60), 145–6 and Keynesian revolution, 98, 100–101, 114–15, 116, 124–5, 137, 138–9, 145–6, 173 and Lucas, 195, 208–11 ‘money multiplier’, 35, 64, 146, 179, 185, 258–9, 268–9, 277–8, 280 in new macroeconomic constitution, 352 and nineteenth-century theory, 9, 29, 44–52 pre-crash orthodoxy/mindset, 2, 146, 212–13, 221–4, 229–35, 249–53, 310–16, 348 primacy under New Consensus, 200–201, 212 ‘real bills’ doctrine, 46–7 as right wing preference, 138–9, 181–2 transmission mechanism of, 64, 146, 250, 250–51, 277–9, 283 Wicksellian, 69–70, 102, 251, 255, 358–9 see also quantitative easing (QE) monetary reformers (first third of twentieth-century), 37, 44, 60–72, 99–106, 116, 124, 125, 129, 177–8, 200, 277, 280 money Aquinas on, 28–9 barter theory, 19, 21, 23–4, 37–8, 45, 63, 69, 384 bartering savage theory, 24 chartalist theory, 23, 25–6 the classical dichotomy, 21–3, 24–5, 36, 66, 121, 183, 201 class-struggle theory of, 27–8 credit theory, 23, 24–7, 33, 34, 39, 100–101, 102–3 creditors and debtors, 29–32, 37, 39, 47 determination of value, 21–2, 25–7, 28–30, 36–9, 41–5 Friedman’s ‘stable demand function’, 179 hoarding of, 35–6, 105, 115, 116, 121, 127–8 Keynes’ ‘monetary theory of production’, 22–3 Keynes’ ‘speculative demand for’, 36, 120, 179, 183, 261 Keynes’ view of, 1, 25, 36, 115, 119, 121 law of ‘diminishing marginal utility’ of, 290–91, 292 and Mill, 19–20, 21, 36 ‘modern monetary theory’, 26 ‘money illusion’, 36–8, 182, 206 as most liquid form of wealth, 36 origins of, 20, 23–5, 39 ‘real’ analysis of classical school (‘money as veil’), 22, 24, 37, 45, 84–5, 121 Smith’s metallist theory, 23–4, 25, 27, 28, 38–9, 44 standard of value as political question, 41, 43–4 theory of, 21–8, 39, 121, 384 see also Quantity Theory of Money (QTM) 482 i n de x and theory of value, 21, 23 in tributary economies, 26 money supply ‘base’ or ‘narrow’ money, 35, 46, 61, 105–6, 165, 185–6, 187–8, 265, 268, 277–8, 279, 280 bimetallist controversy, 44, 50–52 ‘broad’ money, 35, 105–6, 165, 168, 179, 185, 186, 188, 249–50, 268, 268–9, 269 broad money, 275–6, 279–80, 281 in classical theory, 1, 38–9, 47 debasing the coinage/printing of money, 28–9, 32, 41–2, 45–6 exogenous or endogenous question, 35, 39, 100, 183 and Friedman, 177–83 Heath abolishes quantitative controls (1971), 168 late-medieval rediscovery of banking, 33–4 massive expansion worldwide (1969–73), 164–5 measures of, 34–5, 71, 249, 279–80 Smith on, 38 velocity of circulation, 38, 62–5, 71, 101, 129, 146, 168, 179, 187, 268–9, 283–4, 285, 287 Victorian fiscal constitution, 9, 29, 59, 76 see also Quantity Theory of Money (QTM) Mont Pelerin Society, 176–7 Montagu, Sir Edwin, 107 Monte dei Paschi di Siena, 364 Moody’s (CR A), 329 mortgage-backed securities (MBS), 256–7, 274, 320–21, 323, 327, 328 Mosler, Warren, 26 Müller-Armack, Alfred, 153 Mummery, A.


pages: 180 words: 55,805

The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future by Jeff Booth

3D printing, activist fund / activist shareholder / activist investor, additive manufacturing, AI winter, Airbnb, Albert Einstein, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, basic income, bitcoin, blockchain, Bretton Woods, business intelligence, butterfly effect, Claude Shannon: information theory, clean water, cloud computing, cognitive bias, collapse of Lehman Brothers, corporate raider, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, dark matter, deliberate practice, digital twin, distributed ledger, Donald Trump, Elon Musk, fiat currency, Filter Bubble, full employment, future of work, game design, Gordon Gekko, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invention of movable type, Isaac Newton, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, late fees, Lyft, Milgram experiment, Modern Monetary Theory, moral hazard, Nelson Mandela, Network effects, oil shock, pattern recognition, Ponzi scheme, quantitative easing, race to the bottom, ride hailing / ride sharing, self-driving car, software as a service, technoutopianism, the scientific method, Thomas Bayes, Turing test, Uber and Lyft, uber lyft, universal basic income, winner-take-all economy, X Prize, zero-sum game

Perhaps that is why almost all current proposals today land in two overarching camps on opposing sides of the political spectrum: on one side, those that use lever 3, and on the other side, those that use lever 4. The solutions in them are largely similar in their outcomes but have many different forms. Let’s look at the two sides one at a time. Continued low or negative interest rate environment, central bank printing, modern monetary theory, or other guarantees to keep the party going The greatest irony of this camp is that it has the highest belief in a free-market economy and capitalism but at the same time doesn’t realize that free-market capitalism is not what is happening today. Many of the current policies around the world could be categorized here, along with many other proposals on the table.


pages: 477 words: 144,329

How Money Became Dangerous by Christopher Varelas

activist fund / activist shareholder / activist investor, Airbnb, airport security, barriers to entry, basic income, Bear Stearns, bitcoin, blockchain, Bonfire of the Vanities, California gold rush, cashless society, corporate raider, crack epidemic, cryptocurrency, discounted cash flows, disintermediation, diversification, diversified portfolio, Donald Trump, dumpster diving, eat what you kill, fiat currency, fixed income, friendly fire, full employment, Gordon Gekko, greed is good, interest rate derivative, John Meriwether, Kickstarter, Long Term Capital Management, mandatory minimum, mobile money, Modern Monetary Theory, mortgage debt, pensions crisis, pets.com, pre–internet, profit motive, risk tolerance, Saturday Night Live, shareholder value, side project, Silicon Valley, Steve Jobs, technology bubble, The Predators' Ball, too big to fail, universal basic income, zero day

Which can only make one wonder, why have we not assessed this danger with more concern and diligence? To the contrary, there seem to be growing voices arguing for the expansion of borrowing and government spending to achieve various policy objectives. Nobel Prize winners and politicians alike have put forth theories including the revival of a century-old idea called Modern Monetary Theory (MMT), which argues that government’s monopoly control over money allows, if not requires, that any and all fiscal policies be undertaken to ensure full employment—for example, printing as much currency as desired, without cause for worry that such an action would lead to inflation or possibly the loss of systemic financial integrity.

Filter, 153, 162, 164–68, 172, 179 Weill and, 188–89, 196 see also hostile takeovers meritocracy, 60–61, 310, 362 Meriwether, John, 57, 59, 60, 62–64, 66–68, 76 Merrill Lynch, 51, 190, 191, 196, 207, 345 Citron and, 316, 318, 319, 343, 344 Messier, Jean-Marie, 168–70, 175–76 Heckmann and, 168, 169, 173, 174 Messih, Robert, 198–200, 212 Mestre, Eduardo, 119–23, 136, 138, 145–46 Meyer, Ron, 169 Microsoft Windows, 218–19 Milken, Michael, 91–94, 96–97, 104 background of, 91–92 at Drexel, 91–94 indictment and prison sentence of, 92, 96, 104 Predators’ Ball of, 93–94 reinvention of, 104 Millennials, 294 Miller Brewing Company, 162 mission statements, 103 Modern Monetary Theory (MMT), 330 money laundering, 31–33, 38–40 Monkey Bar, 70–71 Morgan, Cristina, 199 Morgan Stanley, 133, 196, 215 cocktail reception of, 69–70 Morgan Stanley Dean Witter, 209 mortgage market, 21 mosque shooting, 304–5 Mozer, Paul William, 55–58, 62, 64, 67–69, 72, 74–76, 262 Mozer rule, 56 MTV, 302 Murray, Angela, 204 Napoleon III, 169 National Institutes of Health, 303 National Investment Bank, 5 Netflix, 160 Newsday, 137 New Yorker, 196, 212, 306 New York Post, 290 New York Stock Exchange (NYSE), 176, 268 New York Times, 59, 167, 209, 302, 303–4 New York Times Magazine, 84 New Zealand: mosque shooting in, 304–5 preppers and, 306–7 Nietzsche, Friedrich, 44 9/11 terrorist attacks, 176, 235–36 92nd Street Y, 207–8 Nokia, 202 Northrop Corporation, 113, 118–19, 125 B-2 Stealth Bomber, 118, 136, 138 Grumman’s negotiations with, 119–24, 136–38, 142–43, 145–46 Northrop Grumman Corporation, 146 Notre Dame, University of, 151–53 NYFIX, 242 Obama, Barack, 340 Occidental College, 4, 11, 81, 83, 89, 99, 111, 287 Oftelie, Stan, 334 Operation Desert Storm, 114 Operation Polar Cap, 39 Oracle, 261 Orange County, Calif., 4, 312–19, 323–28, 330–36, 342–45, 351–52, 365 Citron in, 315–20, 324, 326, 343–45, 352, 367 pension system in, 345 Project Robin Hood in, 331–33 Orange County Register, 315 Orange County Transportation Authority (OCTA), 334–35 Orwell, George, 210 Osnos, Evan, 306, 307 other line, see privilege ownership, asset division and, 246 Oyster Bay golf outings, 134–36 PAIX (Palo Alto Internet Exchange), 223, 228 Partinoli, Dave, 185–86 Patriot Bank, 372–73 Paul, Jake, 282–83, 295, 299, 301–2, 305 Paul, Logan, 282–84, 293–96, 299–303 PayPal, 233, 307 Pendergrass, Kristina, 336 pension systems, 335–39, 353–54, 359 accountability and, 369 in Orange County, 345 oversight or review board for, 366–67 in Stockton, 335–36 Penthouse, 244 PeopleSoft, 261 Perez, Monalisa, 303–4 pets.com, 229–30 PewDiePie, 304–5 Pfefferman scandal, 31 phone minutes: as currency, 245 see also prepaid calling cards Podesto, Gary, 320, 321 pooling, 170–72, 176 pornography, 218, 219, 233, 244 Danni’s Hard Drive site, 226, 227, 231–33 portfolio insurance, 37 poverty, 349 Predators’ Ball, 93–94 Predators Ball, The (Bruck), 93, 94 prepaid calling cards, 220–21, 223, 245, 246 SmarTalk, 218, 221–23, 244 preppers (survivalists), 305–8 Pretty Woman, 98–103, 106 Prince, Chuck, 208–10, 211 private companies, 177 Private Jet Studio, 303 privilege, 280–310, 362 air travel and, 299–300 Disneyland and, 289–90 education and, 291–92 extended across generations, 291 healthcare and, 291 social media influencers and, 283–84, 291–99, 301–3, 305 Project Passion culture committee, 204–6, 211, 264–65, 365–66 Project Robin Hood, 331–33 Purcell, Tom, 133, 325 Purpdrank, Jerry, 295 quarterly earnings expectations, 177–78 of Lucent, 194 of U.S.


pages: 233 words: 71,775

The Joy of Tax by Richard Murphy

banking crisis, banks create money, carried interest, correlation does not imply causation, en.wikipedia.org, failed state, full employment, Gini coefficient, high net worth, land value tax, means of production, Modern Monetary Theory, Money creation, offshore financial centre, quantitative easing, race to the bottom, savings glut, seigniorage, The Spirit Level, The Wealth of Nations by Adam Smith, transfer pricing

There are, in fact, five functions that tax can fulfil when it is seen as a cash reclamation process, all of which are about the government putting its economic policies into effect through its control of this money recovery exercise. The first of these other reasons (and so reason no. 2 in the overall list) for raising tax is that, as the modern monetary theory school of economic thinking suggests, unless a government demands that taxes be paid using the currency that it issues there is no obvious reason for people to use that government-created currency in the economy it is trying to manage. In other words, the reason for demanding payment of tax is to make the local currency, issued, backed and controlled by the government, the only useful currency in that place.


pages: 242 words: 73,728

Give People Money by Annie Lowrey

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Airbnb, airport security, autonomous vehicles, barriers to entry, basic income, Bernie Sanders, bitcoin, clean water, collective bargaining, computer age, crowdsourcing, cryptocurrency, deindustrialization, desegregation, Donald Trump, Edward Glaeser, Elon Musk, ending welfare as we know it, everywhere but in the productivity statistics, full employment, gender pay gap, gig economy, Google Earth, Home mortgage interest deduction, income inequality, indoor plumbing, information asymmetry, Jaron Lanier, jitney, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, Kodak vs Instagram, labor-force participation, late capitalism, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, mass incarceration, McMansion, Menlo Park, mobile money, Modern Monetary Theory, mortgage tax deduction, new economy, obamacare, Peter Thiel, post scarcity, post-work, Potemkin village, precariat, randomized controlled trial, ride hailing / ride sharing, Robert Bork, Ronald Reagan, Sam Altman, self-driving car, Silicon Valley, single-payer health, Steve Jobs, TaskRabbit, The future is already here, The Future of Employment, theory of mind, total factor productivity, Turing test, two tier labour market, Uber and Lyft, uber lyft, universal basic income, uranium enrichment, War on Poverty, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, women in the workforce, working poor, World Values Survey, Y Combinator

It would dramatically reduce the need for a minimum wage. And it would empower workers by removing the threat of unemployment, which leaves the working class with little to no bargaining power.” It would also “dramatically reduce the amount that we’re already spending on subsistence programs.” The economists in the modern monetary theory school—the so-called deficit owls, who argue that money is nothing more than numbers and that governments should be far less afraid of deficits and debt—and the Center for American Progress have promoted similar policies. For all those upsides, though, such a program might be a nightmare to run.


pages: 290 words: 76,216

What's Wrong With Economics: A Primer for the Perplexed by Robert Skidelsky

"Robert Solow", additive manufacturing, agricultural Revolution, Black Swan, Bretton Woods, business cycle, Cass Sunstein, central bank independence, cognitive bias, conceptual framework, Corn Laws, corporate social responsibility, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, disruptive innovation, Donald Trump, full employment, George Akerlof, George Santayana, global supply chain, global village, Gunnar Myrdal, happiness index / gross national happiness, hindsight bias, Hyman Minsky, income inequality, index fund, inflation targeting, information asymmetry, Internet Archive, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labour market flexibility, loss aversion, Mahbub ul Haq, Mark Zuckerberg, market clearing, market friction, market fundamentalism, Martin Wolf, means of production, Modern Monetary Theory, moral hazard, paradox of thrift, Pareto efficiency, Paul Samuelson, Philip Mirowski, precariat, price anchoring, principal–agent problem, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, shareholder value, Silicon Valley, Simon Kuznets, sunk-cost fallacy, survivorship bias, technoutopianism, The Chicago School, The Market for Lemons, The Nature of the Firm, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, transaction costs, transfer pricing, Vilfredo Pareto, Washington Consensus, Wolfgang Streeck, zero-sum game

The main reason is that, unlike in most natural sciences, there is no secure method of bringing any generalising economic proposition to the test. There are too many fine economists and schools of thought outside the mainstream tradition to come even close to doing them justice within this book: ecological economics, feminist economics, econophysics, biophysical economics and modern monetary theory is an incomplete list of doctrines that are mostly set aside here. The only defence against their exclusion is that this book is not intended as a summary of the alternative schools or approaches. Excellent works in that vein include John T. Harvey’s Contending Perspectives in Economics and Rethinking Economics: An Introduction to Pluralist Economics, an edited volume produced by members of the student movement Rethinking Economics.2 If the presentation of the book suggests that those outside the mainstream have the status of mere dissidents to the dominant tradition, that is entirely unintended.


pages: 286 words: 79,305

99%: Mass Impoverishment and How We Can End It by Mark Thomas

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, additive manufacturing, Albert Einstein, anti-communist, autonomous vehicles, bank run, banks create money, bitcoin, business cycle, call centre, central bank independence, complexity theory, conceptual framework, creative destruction, credit crunch, declining real wages, distributed ledger, Donald Trump, Erik Brynjolfsson, eurozone crisis, fiat currency, Filter Bubble, full employment, future of work, Gini coefficient, gravity well, income inequality, inflation targeting, Internet of things, invisible hand, Jeff Bezos, jimmy wales, job automation, Kickstarter, labour market flexibility, laissez-faire capitalism, light touch regulation, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, Modern Monetary Theory, Money creation, money: store of value / unit of account / medium of exchange, Nelson Mandela, North Sea oil, Occupy movement, offshore financial centre, Own Your Own Home, Peter Thiel, Piper Alpha, Plutocrats, plutocrats, profit maximization, quantitative easing, rent-seeking, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, smart cities, Steve Jobs, The Great Moderation, The Wealth of Nations by Adam Smith, wealth creators, working-age population

Behavioural economics seeks to address the fact – known for decades in other disciplines and more recently discovered by economists – that humans are not rational, consistent beings (Homo Economicus) with perfect information about the economy, who seek to maximize the discounted value of their own cash flows. Modern Monetary Theory seeks to ensure that the realities of a fiat currency (which can be created at will by government) and of sectoral balances which sum to zero are taken into account in policy-making. Most fundamentally, the work of economists such as Steve Keen and Marc Lavoie challenges the use of linear equilibrium-seeking models as the basis for understanding how the economy works.


pages: 245 words: 75,397

Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader by Colin Lancaster

Adam Neumann (WeWork), Airbnb, always be closing, asset-backed security, beat the dealer, Ben Bernanke: helicopter money, Bernie Sanders, bond market vigilante , Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, buy the rumour, sell the news, Carmen Reinhart, Chuck Templeton: OpenTable:, collateralized debt obligation, coronavirus, Covid-19, COVID-19, creative destruction, credit crunch, currency manipulation / currency intervention, Donald Trump, Edward Thorp, family office, fiat currency, fixed income, Flash crash, global pandemic, global supply chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Growth in a Time of Debt, housing crisis, index arbitrage, Jeff Bezos, Kenneth Rogoff, liquidity trap, Long Term Capital Management, low skilled workers, margin call, market bubble, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, National Debt Clock, Nixon triggered the end of the Bretton Woods system, Northern Rock, oil shock, pets.com, Ponzi scheme, price stability, quantitative easing, reserve currency, Ronald Reagan, Ronald Reagan: Tear down this wall, Sharpe ratio, short selling, statistical arbitrage, The Great Moderation, too big to fail, trickle-down economics, two and twenty, value at risk, WeWork, yield curve, zero-sum game

In a deflationary environment, wages go down. The real danger would be a period of deflation followed by a nasty dose of stagflation. After unsuccessfully trying to solve a debt crisis with more debt, policymakers will need to do something else. He thinks we could be headed to something called modern monetary theory (MMT), but this would bring serious inflationary implications. The central idea of MMT is that governments with a fiat currency system can and should print as much money as they need to spend. It all sounds enticing but seems to fly in the face of stuff like working hard, living modestly, and building a nest egg.


pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), job polarisation, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, Post-Keynesian economics, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

Piketty’s wealth tax is a prime example of “solutionism”: a proposal intended to solve all of the world’s problems through tweaks to the current institutional architecture. He pays little attention to power, to politics, or any other drivers of change. The same can be said for a lot of other radical ideas that have recently become popular, like modern monetary theory, land value taxation, or universal basic income. These can all be understood as a kind of technocratic utopianism — they rely on the assumption that society can be transformed from above and that making one or two radical policy changes will completely transform the economy. Many of these policies are not incorrect or bad, but their adherents often prescribe them as the solution to all the world’s problems, without considering how we got to where we are in the first place.


pages: 298 words: 95,668

Milton Friedman: A Biography by Lanny Ebenstein

"Robert Solow", affirmative action, banking crisis, Berlin Wall, Bretton Woods, business cycle, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Modern Monetary Theory, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Ponzi scheme, price stability, rent control, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thorstein Veblen, zero-sum game

According to Bernanke, “One can hardly overstate the influence of Friedman’s monetary framework on contemporary monetary theory and practice. He identified the key empirical facts and he provided us with broad policy recommendations,” and “Friedman’s monetary framework has been so influential that, in its broad outlines . . . , it has nearly become identical with modern monetary theory and practice.”22 According to Alan Greenspan, Bernanke’s predecessor, “There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of these very few people.”23 Friedman wrote in 2001: “I have always myself emphasized that it took three words to describe the kind of capitalism I was in favor of: free private property.”


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

balance sheet recession, banking crisis, basic income, Bear Stearns, Bernie Sanders, Bretton Woods, business climate, business cycle, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Modern Monetary Theory, Money creation, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, Post-Keynesian economics, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, Tragedy of the Commons, transaction costs, trickle-down economics, universal basic income, very high income

Her current research is funded by the European Commission, the Institute for New Economic Thinking (INET), the Ford Foundation, NASA and the Brazilian Ministry for Science and Technology. Stephanie Kelton is Professor of Economics at the University of Missouri-Kansas City. Her research expertise is in Federal Reserve operations, fiscal policy, social security, international finance and employment. She is best known for her contributions to the literature on Modern Monetary Theory. Her book, The State, The Market and the Euro (Edward Elgar, 2003) predicted the debt crisis in the eurozone. She served as Chief Economist on the US Senate Budget Committee and as an economic advisor to the Bernie Sanders 2016 presidential campaign. She was Founder and Editor-in-Chief of the top-ranked blog ‘New Economic Perspectives’ and a member of the TopWonks network of America's leading policy thinkers.


pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Boris Johnson, Bretton Woods, business cycle, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, disruptive innovation, distributed ledger, Edward Snowden, Ethereum, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial exclusion, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Johannes Kepler, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, The Rise and Fall of American Growth, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

Other states, most notably Virginia, were more careful.26 In 1729, the 23-year-old Ben Franklin made an indelible mark on the history of paper currency with his self-published book A Modest Enquiry into the Nature and Necessity of a Paper Currency. Although Franklin did not have access to modern monetary theory (and confused wealth and money in some places), overall the book is brilliantly intuitive. For example, Franklin had an innate grasp of what later came to be called the quantity theory of money: “There is a certain proportionate Quantity of Money requisite to carry on the trade of a Country freely and currently.”


pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Bear Stearns, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, Nelson Mandela, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, tail risk, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, two and twenty, undersea cable, value at risk, Washington Consensus, Yom Kippur War

This bank also has a 10 per cent reserve rule, so it deposits $9 at the central bank and lends out the remaining $81 to another of its clients. After several more rounds, the professor asks the class to compute the increase in the supply of money. This allows him to introduce two of the core definitions of modern monetary theory: M0 (also known as the monetary base or high-powered money), which is equal to the total liabilities of the central bank, that is, cash plus the reserves of private sector banks on deposit at the central bank; and M1 (also known as narrow money), which is equal to cash in circulation plus demand or ‘sight’ deposits.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"Robert Solow", bank run, banking crisis, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Available from http://cowles.econ.yale.edu/P/cp/p05a/p0532.pdf. 14 “I am the Lord your God and you shall have no other gods before me.” See also Bernanke speech in footnote 13: “Friedman’s monetary framework has been so influential that, in its broad outlines at least, it has nearly become identical with modern monetary theory and practice. I am reminded of the student first exposed to Shakespeare who complained to the professor: ‘I don’t see what’s so great about him. He was hardly original at all. All he did was string together a bunch of well-known quotations.’ The same issue arises when one assesses Friedman’s contributions.” 15 “The professors contrive new rules and methods . . . whereby all the fruits of the earth shall increase a hundredfold more than they do at present, with innumerable other happy proposals . . .


pages: 466 words: 127,728

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shale / tar sands, open economy, Plutocrats, plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

In the 1920s John Maynard Keynes adopted chartalism in his calls for the abolition of gold standards. More recent acolytes of the theory of money as an arm of state power are Paul McCulley, former executive at bond giant PIMCO, and Stephanie Kelton, economist at the University of Missouri, who marches under the banner of modern monetary theory. A new entrant in the money theory sweepstakes is the quantity theory of credit. This theory, advanced by Richard Duncan, is a variant of the quantity theory of money. Duncan proposes that credit creation has become so prolific and pervasive that the idea of money is now subsumed in the idea of credit, and that credit creation is the proper focus of monetary study and policy.


pages: 554 words: 158,687

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

"Robert Solow", Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low skilled workers, M-Pesa, market bubble, means of production, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, Post-Keynesian economics, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

Rather, the problem is that Smith’s abstraction does not provide a logical foundation for the emergence of money out of the difficulties of direct exchange. Contemporary ‘economic theory’ is fully aware of this weakness and has attempted to answer it by developing a variety of further abstractions, briefly mentioned in the text below. Graeber, and other critics from anthropology and related disciplines, appear unaware of this aspect of modern monetary theory. 18 As was explicitly acknowledged in Frank Hahn, Money and Inflation, Blackwell: Oxford, 1982. 19 Carl Menger, ‘On the Origin of Money’, Economic Journal 2, 1892, pp. 239–55. Carl Menger, Principles of Economics, New York: New York University Press, 1981. 20 The original contribution in this literature is Robert A.


pages: 524 words: 155,947

More: The 10,000-Year Rise of the World Economy by Philip Coggan

"Robert Solow", accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Andrei Shleifer, anti-communist, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Bob Noyce, bond market vigilante , Branko Milanovic, Bretton Woods, British Empire, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, credit crunch, Credit Default Swap, crony capitalism, currency peg, debt deflation, Deng Xiaoping, discovery of the americas, Donald Trump, Erik Brynjolfsson, European colonialism, eurozone crisis, falling living standards, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, Frederick Winslow Taylor, full employment, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, global supply chain, global value chain, Gordon Gekko, greed is good, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, TaskRabbit, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, Yom Kippur War, you are the product, zero-sum game

After he replaced Ms Yellen, Trump criticised her successor, Jerome Powell, for pushing rates up too quickly. In Britain, Brexiteers criticised the Bank of England for being too gloomy in its forecasts of the economic impact of leaving the EU. On the left, some economists have criticised central banks for being too timid, and for failing to revive the economy. Some favour Modern Monetary Theory, which argues that a government that prints its own money cannot go bankrupt, and that there is thus no need to worry about budget deficits and plenty of scope for governments to spend money on infrastructure and social benefits.12 MMT advocates admit that inflation is a constraint on this process.


pages: 583 words: 182,990

The Ministry for the Future: A Novel by Kim Stanley Robinson

"Robert Solow", agricultural Revolution, airport security, availability heuristic, basic income, bitcoin, blockchain, Bretton Woods, centre right, clean water, cryptocurrency, dark matter, decarbonisation, distributed ledger, drone strike, European colonialism, failed state, fiat currency, Food sovereignty, full employment, Gini coefficient, global village, happiness index / gross national happiness, High speed trading, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, Kim Stanley Robinson, land reform, liberation theology, liquidity trap, Mahbub ul Haq, megacity, megastructure, Modern Monetary Theory, mutually assured destruction, nuclear winter, off grid, offshore financial centre, place-making, Plutocrats, plutocrats, Ponzi scheme, post-oil, precariat, price stability, quantitative easing, RFID, seigniorage, Shenzhen special economic zone , Silicon Valley, special economic zone, structural adjustment programs, time value of money, Tragedy of the Commons, universal basic income, wage slave, Washington Consensus

Cowboys did figure-eights and stood in their saddles and twirled their lassoes, sheepdogs nimbly nipped sheep through gates, and the images and stories went out worldwide. It was just one moment of the storm, but after that, habitat corridors were more of a thing. E. O. Wilson’s great books shot to the top of the non-fiction bestseller lists, and we could continue the work with more understanding and public support. On to the Half Earth! 73 Modern Monetary Theory was in some ways a re-introduction of Keynesian economics into the climate crisis. Its foundational axiom was that the economy works for humans, not humans for the economy; this implied that full employment should be the policy goal of the governments that made and enforced the economic laws.