Tag Archives: Mat Forstater

Repost: Five (5) Things To Read To Understand Modern Money (MMT)

This is a repost of the original Five (5) Things To Read To Understand Modern Money (MMT) that has since been treated and edited and appears on RealProgressivesUSA.com

There is ‘much ado’ in the media, from business and economic commentators, about Modern Monetary Theory. Everyone from Adam Triggs to John Quiggin to Michael Pascoe and Richard Holden and even Andrew Leigh seem to have something to say.

Anyone that wishes to comment on Modern Monetary Theory is best advised to go to a primary source of the Modern Money developers. These include Australia’s own Bill Mitchell and Martin Watts, as well as many scholars from the University of Missouri-Kansas City, Bard College in New York, and other institutions. The full list has grown to be quite long, and this could never do a comprehensive list justice, but those that should be viewed as a primary source include Warren Mosler, Randall Wray, Stephanie Kelton, Pavlina Tcherneva, Mat Forstater, Scott Fullwiler, Fadhel Kaboub, Rohan Grey, Raul Carrillo, and Nathan Tankus.

A number of simple articles and social media threads are out there to clear up some perceived confusion about Modern Money. None of the commentary below is intended to replace over 25 years of academic work, which can be found at the scholarly institutions.

The first is 20 Simple Points to Understand Modern Monetary Theory by Warren Mosler. Mosler has published several books, explaining these further in mostly simple terms, but grasping the full intent of these points is essential to understanding how today’s Modern Money works.

Next, Scott Fullwiler elaborates on the differences between currency creation and the expenditure of currency. This nuance is frequently overlooked in discussions of Modern Money. Fullwiler shows the effect on central banks and the interest rates determined by central banks.

Thirdly, there are a number of Frequently Asked Questions that I have researched. They are questions commonly asked by those who are discovering Modern Monetary Theory for the first time. These include links to the Modern Money scholars’ accessible works, and links to financial commentary in the media for further reading, on any particular question that anyone may desire to delve.

Rohan Grey continues this list, with mischaracterizations and misconceptions of Modern Monetary Theory. Grey dives deep into how Modern Monetary Theory is applicable to ALL countries, its relationship to the role of institutions, and how it affects economic behaviour and its relationship to the law.

Fifth and finally Raul Carrillo addresses some other typical criticisms of Modern Monetary Theory. Carrillo demonstrates that Modern Monetary Theory is rooted in legal, sociological, anthropological, historical, and cultural foundations. Modern Money can offer insights into what we generally deem to be beyond monetary & fiscal policy. Ideas about labour, banking, development, ecology, inequality, trade & payments have consistently been part of Modern Money thought.

These simple references are to allay any source of confusion, with what media commentators are calling Modern Monetary Theory compared to actual Modern Monetary Theory. It is a comprehensive body of knowledge that is a synthesis of chartalism, credit money, Godley’s stock-flow consistency, functional finance, endogenous money, Minsky’s financial instability hypothesis and the work of Marx, Keynes, Kalecki, Veblen and post-Keynesian and institutional thought.

The textbook Macroeconomics by Mitchell, Watts, and Wray is for those who would like a more scholarly introduction. It is the textbook of the future.

Misconceptions about MMT – Part II

This post continues our three-part (I, II, III) series by Rohan Grey that was originally an educational tweetstorm.  Rohan Grey is a Modern Money scholar, founder of the Modern Money Network (MMN)  and Lawyer.

CLAIM 2 (Claim 1)

MMT ignores the actual practical workings of institutions…institutions are presupposed, & even if they are taken into account it’s presuppose they are the same everywhere, & institutional quality is not looked at

Moving to the second claim, that MMT ignores the actual practical workings of institutions and institutional quality. First, MMT has emphasized from the very beginning the importance of a detailed institutional analysis of monetary operations (arguably more than other PKers), including intra-governmental agency dynamics, such as Stephanie’s article exploring how taxes and bond sales work in the context of fiscal deficits here:

http://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-government-spending

Or Fullwiler’s article tracing the inter-institutional operational steps involved in fiscal spending in the US context here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1825303

Or it’s detailed understanding of primary dealer markets, such as Eric Tymoigne’s piece here:

Click to access wp_788.pdf

Indeed, many MMT scholars consider themselves working in the tradition of Hyman Minsky, who always and everywhere emphasized understanding the institutional arrangements and innovations that emerge endogenously from financial systems.

Hence, MMT scholars such as Randy Wray and Yeva Nersisyan highlighting the importance of the shift towards a shadow bank-centric world, here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1559383

And designing proposals that go into detail in terms of proposing new institutional arrangements for the financial system, such as here:

Click to access ppb_115.pdf

https://digitalcommons.bard.edu/cgi/viewcontent.cgi?article=1159&context=hm_archive

https://www.huffpost.com/entry/proposals-for-the-banking_b_432105

Or understanding corporate taxation and other possible ways of curbing corporate power, such as Nathan and my work here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3200249

In addition to work looking at the potential for local and complementary currency systems to be integrated with food systems, such as Ben Wilson’s work here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3411111

Or Mat Forstater and Josefina Li’s work here:

https://books.google.com/books?id=MxVBDwAAQBAJ&pg=PR5&lpg=PR5&dq=josefina+li+complementary+currency&source=bl&ots=R5HqlfokOp&sig=ACfU3U1kWB_MpODsPqkU6dYfpEpP-lBh5Q&hl=en&sa=X&ved=2ahUKEwjvqdnBnMLkAhViS98KHbTGDFQQ6AEwAHoECAkQAQ#v=onepage&q=josefina%20li%20complementary%20currency&f=false

And @RaulACarrillo ’s work tracing out the legal-institutional structures constraining individual freedom here, connecting MMT directly with Hale:

Keeping It Real: Law, Coercion, & The Frontiers of Public Finance

And Pavlina’s research into the evolution of state-legal institutions as a vehicle for power:

http://www.levyinstitute.org/publications/money-power-and-monetary-regimes

As well as Mat Forstater’s work on the chartalism in a colonialist context:

Click to access RiPE%20Forstater.pdf

And possibilities for confederalist governance models of a JG, here:

https://link.springer.com/chapter/10.1057/9781137313997_7

In addition, MMTers were some of the first to highlight the potential for the coin seigniorage to overcome specific institutional constraints in the context of the US debt ceiling debate, as evidenced here:

Coin Seignorage and Inflation

And more broadly have engaged with the legal and political science literature around central bank independence, such as here (Randy):

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2407707

And me:

I personally have written a lot on the unique institutional dynamics of financial systems in developing countries with mobile money systems, such as here:

https://www.binzagr-institute.org/working-paper-no-116/

As well as consulted directly with companies and the UN on new digital currency technologies and considerations for countries around the world to implement, as seen here:

Click to access TheMacroeconomicImplicationsOfDigitalFiatCurrencyEVersion.pdf

Click to access DFC-O-006_Report%20on%20Regulatory%20Challenges%20and%20Risks%20for%20Central%20Bank%20Digital%20Currency.pdf

And my advisor Bob Hockett, a MMT ‘fellow traveler’ that has regularly collaborated with MMTers, has written extensively on the legal historical foundations of endogenous money with Saule Omarova:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2820176

As well as the corporate law form and its relationship to the modern banking charter:

https://scholarship.law.cornell.edu/facpub/1451/

And this is before we get to the historical research that MMT scholars have undertaken on the origins of money and monetary dynamics in pre-modern societies, which obviously implies different institutional relationships:

Click to access hudson.pdf

Click to access wp_832.pdf

including a broader understanding of ‘the state’ that includes religious authorities:

Click to access SemenovaOriMonEva.pdf

https://econpapers.repec.org/article/blaajecsc/v_3a70_3ay_3a2011_3ai_3a2_3ap_3a376-400.htm

I’m also conducting research specifically on the privacy implications of monetary system design, specifically in the context of emerging digital currency technologies:

https://macromusings.libsyn.com/143-rohan-grey-on-digital-currency-privacy-and-modern-monetary-theory

So the idea that MMT has some ‘one-sized fits all’ understanding of institutions, and ignores actual practical workings of specific state systems, is simply false.