Towards a pure state theory of money

Ballinger, Clint (2013): Towards a pure state theory of money.

Abstract

MODERN MONETARY THEORY (MMT) notes correctly that money is a creature of the state, and that important macroeconomic and policy conclusions follow from this understanding, e.g., sovereign states are not revenue constrained and spending is primarily limited by inflation. Taxes give value to state money and maintain its value (i.e., inflation can be controlled through taxes). One (among many) key policy insight is that a job guarantee is possible. A job guarantee not only achieves what many think should for myriad social reasons be a primary goal of macroeconomics but also further creates a buffer stock (the most useful one of any imaginable given the social reasons just mentioned) that achieves an additional primary macroeconomic policy goal – stability. However, there is no state that operates under a pure state system of money. Most of what serves as money in most banking systems in the world is privately created credit money. We can compare the current most common banking system with a pure state system of money:

• Item Type: MPRA Paper
• Language: English
• Keywords: The chicago plan, Full Reserve Banking, Modern Monetary Theory, 100% reserves, Alfred Mitchell-Innes, Austrian economics, Bagehot, bank reform, banking crisis, chartalism, chartalist, Circuit theory, credit money, endogenous money, financial crisis, Fractional Reserves, Georg Friedrich Knapp, Limited Purpose Banking, Lombard Street, MCT, Misesean banking, mmt, modern monetary theory, narrow banking, neo-chartalism, circuitisme
• Subjects: A - General Economics and Teaching > A1 - General Economics; A - General Economics and Teaching > A1 - General Economics > A10 - General; E - Macroeconomics and Monetary Economics > E0 - General; E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

References

L. Randall Wray. “The Credit money, state money, and endogenous money approaches: A survey and attempted integration.”

Knapp, Georg Friedrich. (1924 [1905]. The State Theory of Money. Clifton: Augustus M. Kelley.

Mitchell-Innes, Alfred (1914), ‘The credit theory of money’, Banking Law Journal, (Dec/Jan.), 151-68.