Modern Money Theory

A Simple Guide to the Monetary System

verfasst von: Dirk Ehnts

Verlag: Springer Nature Switzerland

Buchreihe : Professional Practice in Governance and Public Organizations

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

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Über dieses Buch

This book explains how central banks, banks and governments create money. Written in an accessible style, this book provides an introduction to modern monetary theory without requiring any prior knowledge of economics. It covers the most important aspects of monetary theory, including inflation targeting, government spending, and international trade, as well as economic policy to achieve macroeconomic goals, such as price stability, full employment and sustainable use of resources. Accordingly, it offers a valuable asset for students of economics, central bankers, banking professionals, and academics alike.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract

Modern Money Theory has been around for more than a quarter of a century. It started as insights gained by a banker, when he visited the Italian central bank and Treasury. Ehnts explains how he got involved.

Dirk Ehnts

Chapter 2. The Biden Administration and the Copernican Turn

Abstract

The pandemic has led the US government to increase government spending drastically. Due to lockdowns, tax revenues decreased, so that the 2020 public fiscal deficit tripled from $1 to $3 trillion. While this may sound like a scary number, the US government cannot run out of money, given the setup of its institutions. The “public debt” is just the amount of dollars that the federal government spent into the economy and did not receive back as taxes yet. This means that we have to rethink economics and economic policymaking. While there are political constraints in place to constrain government spending, there are no technical constraints. The public deficit and the interest rate by the Fed are less important than we thought, government spending is what mostly drives the US economy. Banks, like SVB, play a role as well, financing private investment.

Dirk Ehnts

Chapter 3. The Paper Currency of Virginia (1760s) and Its Lessons

Abstract

Colonial paper currency regimes like that of Virginia in the 1760s hold many lessons for today. Ehnts shows, based on historical accounts of the time, how paper currency was used by the government to provision itself with resources in order to build and maintain public infrastructure like bridges. The monetary system is shown from the perspective of the government, which provides us with new insights. The government will have to decide the name of the currency, how much it pays for one hour of work, how much to spend, and how much to tax. It also needs to think about what resources to use and what to do with them. The chapter draws attention to questions like how to draft a federal budget and what the nature of the “public debt” is.

Dirk Ehnts

Chapter 4. Modern Money Theory as Part of Economics

Abstract

While Modern Monetary Theory has been created outside of the economics discipline, some of its main ideas have quite prominent forerunners. These shared ancestors include Georg Friedrich Knapp and his “State Theory of Money” from 1905. Today’s theories that are used as intellectual foundations to inform fiscal and monetary policy derive from different origins. This chapter introduces readers to the ideas that rule our current use of fiscal and monetary policy. After describing these theories, they are used to explain the economic performance of the last couple of decades. Other subjects covered include international trade, sectoral balances, and unit labor costs.

Dirk Ehnts

Chapter 5. What is Economic Policy?

Abstract

This chapter on economic policy highlights the monetary circuit, a flow of income that constitutes a large part of our economy. Instruments of economic policymaking are introduced and discussed. Concepts include opportunity costs and affordability; policy instruments include the state budget and the Job Guarantee. The modern business cycle is examined in some detail and policy responses evaluated. The role of banks in the economy is described with a focus on their role in the real estate boom and bust that led to the Global Financial Crisis in 2008/09 examined.

Dirk Ehnts

Chapter 6. Economic Policies Based on MMT

Abstract

Modern Money Theory (MMT) is a theory of how money is created and how it circulates, in the form of cash, reserves, and bank deposits. It is not a theory of economic policy, but economic policies informed by MMT insights do exist. Questions that can be answered include how we can ensure full employment and price stability, what a Job Guarantee should look like in practice, what industrial policy and a Green New Deal can achieve, how to fight inequality and bring about climate justice, and what an economic bill of rights for the twenty-first century might look like.

Dirk Ehnts

Chapter 7. Outlook

Abstract

In this concluding outlook, the book’s main insights are summarized. Changing the political rules in our society is possible and achievable, and so it changing economic policy. With a new paradigm in place, our society can manage resources in a way that should increase the well-being of citizens.

Dirk Ehnts

Backmatter

Titel: Modern Money Theory
verfasst von: Dirk Ehnts
Verlag: Springer Nature Switzerland
Electronic ISBN: 978-3-031-53537-6
Print ISBN: 978-3-031-53536-9
DOI: https://doi.org/10.1007/978-3-031-53537-6