MODERN MONEY THEORY: THE BASICS
New Economic Perspectives has the article MODERN MONEY THEORY: THE BASICS by L. Randall Wray. This is not a reprint of any earlier article, but a retelling of the story. When I need to learn something complicated, I find that the more times I read about it, the better I understand it, even if the reading goes over much of the material I have read before. Given this style of learning, I do not fret too much about reading the first article I read on a subject and trying to study it in such depth that I understand it all. That is not the way depth of understanding comes to me. Of course your style of learning is almost certainly different from mine in some aspect. We all learn in different ways.
Here are some quotes to whet your appetite.
The problem is not the “thin air” nature of the creation, but rather the quantities of “money” created and the purposes for which it was created. Government spending for the public purpose is beneficial, at least up to the point of full employment of the nation’s resources. Bank lending for public and private purposes that are beneficial publicly and privately is also generally desirable.
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While our governments are large, they are not big enough to provide all the monetary IOUs we need for the scale of economic activity we desire. And we—at least we Americans—are skeptical of putting all monetized economic activity in the hands of a much bigger government. I cannot see any possibility of running a modern, monetized, capitalist economy without private financial institutions that create the monetary IOUs needed to initiate economic activity.
Apparently, even Paul Krugman is having trouble digesting this, and he already has his Nobel Prize in Economics. I am lucky enough to know that my understanding is limited, so I do not insist that new ideas conform to everything I think I already know.