Neil Wilson — The Consolidated Government Sector

The key analytic technique that MMT uses that sets it apart from most others, is that it uses a consolidated government sector in its analysis (although apparently the mainstream is slowly catching on). This allows it to cut through the obfuscating political constructions between the various government departments and institutions and concentrate on the essence of what is happening

This is entirely consistent with accepted accounting practice, using a technique known as group accounting - which produces consolidated financial statements (income, balance and cash) amongst a related group of entities. The international accounting standard for that is IFRS 10 'Consolidated Financial Statements' which requires that entities under common control present a consolidated set of accounts so that external users can obtain a 'true and fair view' of the actual underlying economic transactions.

The Central Bank in all sovereign jurisdictions falls under the definition of control by the Treasury - often de facto by the operation of law (Bernanke: "Our job is to do what Treasury tells us to do"), but also de jure, e.g in the Sterling area HM Treasury actually owns the entire shareholding of the Bank of England. The control model in IFRS 10 is elaborate to try and catch all those little tricks that entities use to avoid having to consolidate accounts and is worth studying to see the various 'Wizard of Oz' methods that control can be imparted even though the public face is supposedly independent.

Given the control relationship, consolidated financial statements are entirely appropriate and correct accounting which reveals the essence of the underlying transactions. Therefore in your model you should be able to swap out the detailed entities and replace them with the consolidated entity and nothing about the response should change. If it does then it is likely your model is wrong.

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The Consolidated Government Sector
Neil Wilson