Ellis Winningham Introductory Series: The Monetary System – US Currency Part 2

We will continue where we left off with a look at how US Dollars are created, and how they enter and leave the US economy. In part three of our introductory discussions on US currency, we will examine what budget deficits, surpluses and the national debt really are. Following part three, we will then take a look at other aspects of the monetary system, including banking operation and central bank operations.

Ellis Winningham — MMT and Modern Macroeconomics
Introductory Series: The Monetary System – US Currency Part 2

Ellis Winningham

Clint Balinger — Towards A Pure State Theory Of Money, Prologue: A Note On Knapp & Innes

...although a great deal of the suboptimal performance (sustained unemployment, lack of investment in infrastructure, education, and healthcare) has been due to a failure to understand and apply readily implementable state money & functional finance insights, there has also been another major source of economic suffering, resulting from the non-state-money side of the economy. The worldwide private credit money system has caused untold suffering and misery for millions. This side of the equation must be integrated into any functional finance insights that arose from Knapp, Innes, and others....

Clint Balinger
Towards A Pure State Theory Of Money, Prologue: A Note On Knapp & Innes

Nathan Tankus — The Euro as Idealist Project or: How I Learned to Stop Worrying and Love Pragmatic Elites

Nice post by Nathan. Something you need to know historically that Nathan doesn't mention is that the US federal government initially financed itself largely with revenue from tariffs rather than taxation, which was left to the states.

Naked Capitalism
The Euro as Idealist Project or: How I Learned to Stop Worrying and Love Pragmatic Elites
Nathan Tankus, a member of Occupy Wall Street Alternative Banking working group. He is also deeply involved in the heterodox economics community and plans to have a PhD in economics before the decade is done. Cross posted with View From the Metropole.

Peter Cooper — Resistance to the Chartalist View of State Money

Read it heteconomist.com
Resistance to the Chartalist View of State Money

by Peter Cooper

"Lord Keynes" — The History of Modern Monetary Theory

"Lord Keynes" concludes with:

The leading proponents of MMT hold that it is now an independent macroeconomic theory (by contrast, the Cambridge Post Keynesian Mark Hayes regards MMT as a sub-branch of Post Keynesianism). At the very least, Post Keynesianism can be regarded as the important macro-theory that stands behind MMT as one of its intellectual fathers, so to speak.

Perhaps it is even possible to think of MMT economists as a new generation of Post Keynesians - that is, as a younger generation that has developed Post Keynesian theory in new ways.

Read it at Social Democracy For The 21St Century: A Post Keynesian Perspective
The History of Modern Monetary Theory

by Lord Keynes

Perry Mehrling reflects on The Economist on heterodoxy

He thinks that each school has a piece of the answer, and no one has the whole of it. This fits nicely with Hegel's dialectical approach to the development of knowledge, btw, as well as science as a work in progress.

Read it at The Money View
Heterodoxy and The Economist

by Perry Mehrling

UPDATE: JKH comments:
Wed, 01/04/2012 - 6:33am.

Neo-chartalism is strong on accounting and monetary operations, but weak on risk.

Regarding the former, base money is the problem with orthodoxy. Base money in the form of reserves is almost meaningless. Banks do not lend on the basis of reserves. They lend on the basis of capital. Failure to understand this is a profound general problem within the economics profession. In particular, it’s been a problem for its comprehension of QE.

Regarding the latter, the effect of QE is not additional purchasing power. Purchasing power is available already by collateralizing the instruments that might not have been removed from the market. This is not a perfect offset, but it is an important caveat.

The true effect of QE is to take risk out of the market. That is a stabilizing factor in terms of risk management viewed broadly. And it allows resetting of the private market risk taking function. Neo-chartalists don’t seem to acknowledge any of this. They focus on the fact that removing risk from the market removes expected return, and consider that a drain of income rather than a removal of risk. That’s the wrong way to look at.