What has been popularized as MMT (Modern Monetary Theory) began in 1992 as a description of Federal Reserve Bank monetary operations. I self-published 'Soft Currency Economics' in 1994 and in January of 1996 I introduced my analysis to the academic community through an internet discussion group. And while subsequent research revealed earlier writings of authors who had similar understandings, MMT remains sufficiently unique to be categorized as its own school of economic thought. This chapter begins with an analysis of both the source of the price level and what makes it change (casually known as inflation) which is currently unknown to Central Bankers. It also analyses the effects of interest rate policy on the price level, which contradicts that of Central Bankers. The presentation is from a US perspective and applicable to other state currencies with floating exchange rate policies and similar institutional structure.

Article 127 of the Treaty on the Functioning of the European Union establishes that the primary objective of the European Central Bank (ECB) is to maintain price stability.In this paper we propose that the ECB fund a transition-job for anyone willing and able to work, at a wage fixed by the ECB, for the further purpose of enhancing the achievement of its single mandate of price stability. In addition to superior price stability, the transition-job will define a form of full employment and work to balanced economic growth.Estimations of this proposal and the ongoing ECB's unconventional monetary policy show that public purpose is best served by the selection of the alternative buffer stock policy that is directly managed by the ECB. (C) 2017 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.

In this paper we analyze options for the European Central Bank (ECB) to achieve its single mandate of price stability. Viable options for price stability are described, analyzed, and tabulated with regard to both short- and long-term stability and volatility. We introduce an additional tool for promoting price stability and conclude that public purpose is best served by the selection of an alternative buffer stock policy that is directly managed by the ECB.

4. Proposals for the banking system, the FDIC, the Fed, and the Treasury Warren Mosler 1 INTRODUCTION The purpose of this chapter is to present proposals for the banking system, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve...

The root of Europe's sovereign debt crisis can be found in the fact that investors are concerned that countries in the periphery might default, causing them to demand a higher yield on government bonds. What's needed is a way of giving peripheral debt a high degree of safety while allowing peripheral countries to remain users of the euro. A simple solution to this problem would be for peripheral countries to begin issuing a new type of government debt: the tax-backed bond. Tax-backed bonds would be similar to current government bonds except that they would contain a clause stating that if the country failed to make its payments when due--and only if this happens--the bonds would be acceptable to make tax payments within the country in question. This tax backing would set an absolute floor below which the value of the asset could not fall, assuring investors that the bond is always money good, leading to lower bond rates and thus ensuring that peripheral countries would not be driven to default.

The Federal Accounting Standards Advisory Board (FASAB) has proposed subjecting the entire federal budget to accounting--which purports to calculate the debt burden our generation will leave for future generations--and is soliciting comments on the recommendations of its two drafts. The authors of this brief find that intergenerational accounting is a deeply flawed and unsound concept that should play no role in federal government budgeting, and that arguments based on this concept do not support a case for cutting Social Security or Medicare. The FASAB exposure drafts have not made a persuasive argument about basic matters of accounting, say the authors. Federal budget accounting should not follow the same procedures adopted by households or business firms because the government operates in the public interest, with the power to tax and issue money. There is no evidence, nor any economic theory, behind the proposition that government spending needs to match receipts. Social Security and Medicare spending need not be politically constrained by tax receipts--there cannot be any underfunding. What matters is the overall fiscal stance of the government, not the stance attributed to one part of the budget.

Is the current consensus about monetary policy valid? As the authors see it, current monetary policy is designed to use interest rates as a control on longterm inflation. The authors assess the concept, summarize the empirical data, and find that the theory may not work. Supply shocks may cause most inflation, not demand.

The authors point out a rarely considered fact about monetary policy. Ironically, central banks now tolerate inflation that is faster than the rise in wages. Workers pay the price. In this piece, the authors analyze the new focus on core inflation, and the politics involved, and point out that workers are bearing more of the burden than is realized.

This paper engages the last testimony of the Chairman of the Federal Reserve System, Alan Greenspan, before a joint session of Congress in July 2005. It identifies nine areas we relate to the arguments of John Kenneth Galbraith, summarized in his recent contribution, The Economics of Innocent Fraud, regarding the divergence between the innocent fraud of conventional wisdom in regard to economic and accounting realities.

This paper demonstrates that Federal spending is not inherently financially constrained and does not have to be facilitated via prior taxation or debt-issuance. It also refutes the claim that budget deficits result in higher interest rates in the future, with lower levels of capital formation and economic growth as a consequence. These misconceptions together lead to the nonsensical claim that by running surpluses now the Government will be better able (because it has 'more funds stored away') to cope with future spending demands. The paper thus challenges the conventional view, such as that espoused in the 2002 Australian Treasury Intergenerational Report, that the ageing population will place unsustainable demands on the Federal budget.

(2005). The Economics of Innocent Fraud: Truth for Our Time. Journal of Economic Issues: Vol. 39, No. 1, pp. 265-267.

This paper argues that the natural, nominal, risk free rate of interest is zero under relevant contemporary institutional arrangements. However, as Spencer Pack reminded us, “[n]atural and nature are complex words, fraught with ambiguity and contradiction” (1995, 31). The sense in which we wish to employ the term natural here does not imply a “law of nature,” which may be why “[Alfred] Marshall replaced the evocative label ‘natural’ with the more prosaic ‘normal’” (Eatwell 1987, 598). Marshall may have clarified it the best when he wrote that “normal results are those which may be expected as the outcome of those tendencies which the context suggests” ([1920] 1966), 28, emphasis added). In this case, it is of the utmost importance to first clarify the context, to which we now turn.

This paper challenges the conventional view espoused in the 2002 Australian Treasury Intergenerational Report that the ageing population will place unsustainable demands on the Federal budget. The paper explains how the budget is calculated, the role of net spending in the macroeconomy and why debt is issued. It demonstrates that any compositional changes in spending pose political choices rather than economic burdens. It concludes that by ensuring full employment is achieved now, the Government provides the best path to guaranteeing an effective health care system in the future.

When the government issues its own nonconvertible currency-also known as a flexible exchange rate policy-the central bank, as monopoly supplier of net reserves to its member banks, is the (exogenous) source of the risk-free yield curve. Furthermore, in the case of government member bank deposit insurance, the banking system is in no case reserve-constrained. In the context of Professor Stauffer's paper this renders his entire analysis of available funds and demand for balances inapplicable. Only with a fixed exchange rate regime, such as a gold standard, a currency board, or government "peg" of some sort, are interest rates endogenous and subject to the forces Stauffer alludes to.