Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems

Contents
List of Figures
Chapter 1: The Basics of Macroeconomic Accounting
	1.1 The Basics of Accounting for Stocks and Flows
		1.1.1 One’s Financial Asset Is Another’s Financial Liability
		1.1.2 Inside Wealth Versus Outside Wealth
		1.1.3 A Note on Nonfinancial Wealth (Real Assets)
		1.1.4 Net Private Financial Wealth Equals Public Debt
		1.1.5 Rest of World Debts Are Domestic Financial Assets
		1.1.6 A Note on the Importance of Inside Assets
		1.1.7 Basics of Sectoral Accounting, Relations to Stock and Flow Concepts
		1.1.8 Another Note on Real Assets
		1.1.9 Conclusion: One Sector’s Deficit Equals Another’s Surplus
	1.2 MMT, Sectoral Balances, and Behavior
		1.2.1 Deficits→Savings and Debts→Wealth
		1.2.2 Conclusion
	1.3 Stocks, Flows, and Balance Sheet: A Bathtub Analogy
	1.4 Government Budget Deficits Are Largely Nondiscretionary: The Cases of the Great Recession of 2007 and the COVID-19 Pandemic
	1.5 The Wray Curve: Two Paths to Deficits
	1.6 Accounting for Real Versus Financial (or Nominal)
Chapter 2: Spending by Issuer of Domestic Currency
	2.1 What Is a Sovereign Currency?
		2.1.1 Domestic Currency
		2.1.2 One Nation, One Currency (and Exceptions to the Rule)
		2.1.3 Sovereignty and the Currency
	2.2 What Backs Up Currency and Why Would Anyone Accept It?
		2.2.1 Do Reserves of Metal or Foreign Exchange Back the Currency?
		2.2.2 Legal Tender Laws
	2.3 Taxes Drive Money
		2.3.1 Sovereignty and Taxes
		2.3.2 What Does Government Promise? What Does a Government IOU Owe You?
		2.3.3 Conclusion: Taxes Drive Money
	2.4 What If the Population Refuses to Accept the Domestic Currency?
	2.5 Record Keeping in the Money of Account
		2.5.1 Stocks and Flows Are Denominated in the National Money of Account
		2.5.2 The Financial System as Electronic Scoreboard
	2.6 Sovereign Currency and Monetizing Real Assets
	2.7 Sustainability Conditions
		2.7.1 “Sustainability Conditions” for Government Deficits
		2.7.2 “Sustainability” of Current Account Deficits
Chapter 3: The Domestic Monetary System: Banking and Central Banking
	3.1 IOUs Denominated in National Currency
		3.1.1 Government
		3.1.2 Private IOUs
		3.1.3 Leveraging
	3.2 Central Bank Clearing
		3.2.1 Clearing Accounts Extinguishes IOUs
		3.2.2 Pyramiding Currency
			3.2.2.1	 The Central Bank Balance Sheet
	3.3 Central Bank Operations in Crisis: Lender of Last Resort
	3.4 Balance Sheets of Banks, Monetary Creation by Banks, and Interbank Settlement
	3.5 Exogenous Interest Rates and Quantitative Easing
	3.6 The Technical Details of Central Bank and Treasury Coordination: The Case of the Fed2
	3.7 Treasury Debt Operations
	3.8 Conclusions on the Central Bank and Treasury Roles
Chapter 4: Fiscal Operations in a Nation That Issues Its Own Currency
	4.1 Introductory Principles
		4.1.1 Statements That Do Not Apply to a Sovereign Currency Issuer
		4.1.2 Principles That Apply to a Sovereign Currency Issuer
	4.2 Effects of Sovereign Government Budget Deficits on Saving, Reserves, and Interest Rates
		4.2.1 Budget Deficits and Saving
		4.2.2 Effects of Budget Deficits on Reserves and Interest Rates
		4.2.3 Complications and Private Preferences
	4.3 Government Budget Deficits and the “Two-Step” Process of Saving
		4.3.1 Bond Sales Provide an Interest-Earning Alternative to Reserves
		4.3.2 Central Bank Accommodates Demand for Reserves
		4.3.3 Government Deficits and Global Savings
	4.4 What If Foreigners Hold Government Bonds?
		4.4.1 Foreign Holdings of Government Debt
		4.4.2 Current Accounts and Foreign Accumulation of Claims
	4.5 Currency Solvency and the Special Case of the US Dollar
		4.5.1 Isn’t the United States Special?
		4.5.2 What About Government That Borrows in Foreign Currency?
		4.5.3 Conclusion on US Exceptionality
	4.6 Sovereign Currency in the Open Economy
		4.6.1 Government Policy and the Open Economy
		4.6.2 Do Floating Rates Eliminate “Imbalances”?
		4.6.3 Sovereign Versus Nonsovereign Currencies
	4.7 What About a Country That Adopts a Foreign Currency?
		4.7.1 Solvency Questions and Ponzi Finance in a Nonsovereign Currency
Chapter 5: Tax Policy for Sovereign Nations
	5.1 Why Do We Need Taxes? The MMT Perspective
	5.2 What Are Taxes for? The MMT Approach
	5.3 Taxes for Redistribution
	5.4 Taxes and the Public Purpose
	5.5 Tax Bads, Not Goods
	5.6 Bad Taxes
Chapter 6: Modern Money Theory and Alternative Exchange Rate Regimes
	6.1 The Gold Standard and Fixed Exchange Rates
	6.2 Floating Exchange Rates
	6.3 Commodity Money Coins? Part I
	6.4 Commodity Money Coins? Part II
	6.5 Exchange Rate Regimes and Sovereign Defaults
	6.6 The Euro: The Set-up of a Nonsovereign Currency
		6.6.1 The Euro
		6.6.2 Comparison with US States
	6.7 The Crises of the Euro
	6.8 Have the Euro Problems Been Resolved?
		6.8.1 Lasting Reform
	6.9 Currency Regimes and Policy Space: Conclusion
Chapter 7: Monetary and Fiscal Policy for Sovereign Currencies: What Should Government Do?
	7.1 Just Because Government Can Afford to Spend Does Not Mean Government Ought to Spend More
	7.2 The “Free” Market and the Public Purpose
	7.3 Functional Finance
	7.4 Functional Finance Versus the Government Budget Constraint
	7.5 The Debate About Debt Limits (US Case)
		7.5.1 Other Ways to Eliminate the Debt Limit
	7.6 A Budget Stance for Economic Stability and Growth
	7.7 Functional Finance and Exchange Rate Regimes
	7.8 Functional Finance and Developing Nations
	7.9 Exports Are a Cost, Imports Are a Benefit: A Functional Finance Approach
Chapter 8: Policy for Full Employment and Price Stability
	8.1 Functional Finance and Full Employment
		8.1.1 Program Design
		8.1.2 Program Advantages
		8.1.3 Macroeconomic Stability Issues
		8.1.4 What About Exchange Rate Effects?
		8.1.5 Affordability Issues
		8.1.6 Employment Swings
	8.2 The JG/ELR for a Developing Nation
	8.3 Program Manageability
	8.4 The JG/ELR and Real-World Experience
	8.5 The JG and Inequality
	8.6 Conclusions on Full Employment Policy
	8.7 MMT for Austrians: Can a Libertarian Support the JG?
Chapter 9: Inflation and Sovereign Currencies
	9.1 Inflation and the Consumer Price Index
	9.2 Alternative Explanations of Hyperinflation
	9.3 Real-World Hyperinflations
	9.4 Conclusions on Hyperinflation
	9.5 Quantitative Easing and Inflation
	9.6 The COVID Pandemic and the Monetary Policy Response2
	9.7 Conclusion: MMT and Policy
Bibliography
Index