State Monies are Fundamental to Modern Monetary Economies

What is the most appropriate entry point to the study of a monetary economy in which government is currency issuer? Is it “the market”? Is it the definition: total spending equals total income? Is it real exchange? Real production? Is it total output? Total employment? Total value? Distribution of income? The origin of profit? Price formation? Competition?

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Polynomials to the Rescue in the Strange Case of Busted Bets Plus One

Some days, when things seem quiet on the economic front, and even occasionally when they don’t, minds can wander to less weighty matters and become momentarily lost in daydreams of yesteryear; a heady retreat, for instance, back to high school math class one barmy afternoon, sunshine streaming through the windows facing on to Main Quad, with the keener students engrossed in an exploration of the wonders of polynomials; back to a delirious springtime trance interrupted, rudely, by one of the less enthralled students, who wondered aloud, “Yeah, but what good are they in the real world?”

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Unfulfilled Potential

A monetarily sovereign government is one that issues its own currency and is the currency’s sole issuer. Ideally, it allows the currency’s value to float in relation to other currencies in foreign exchange markets, meaning its currency is not convertible at a fixed rate into either another currency or a commodity (other than possibly the commodity labor-power through the provision of a job guarantee). Although this ideal maximizes policy space, a government that promises convertibility can renege at a later date, and so, strictly speaking, does not relinquish its monetary sovereignty so long as it retains the authority to issue its own currency. A monetarily sovereign government that operates a flexible exchange rate faces no revenue constraint provided it refrains from borrowing in a foreign currency and so avoids exchange-rate risk on its debt.

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Short & Simple 20 – Graphing the Income-Expenditure Model

It is easy to represent the ‘income-expenditure model’ in a graph. Some people find this helpful as a visual aid to understanding; others, not so much. For those who find graphs confusing, this post can safely be ignored. In terms of economic meaning, it does not add much to what has already been explained. But for those who are comfortable with graphs, they can be a handy tool for illustrating or thinking through the logic of a model.

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Short & Simple 19 – Sectoral Balances in a Closed, Demand-Determined Economy

We have seen that the ‘income-expenditure model’ combines key macro identities (introduced in parts 7 and 15) with particular behavioral assumptions to provide a theory of income determination (considered in parts 16 and 18). The behavioral assumptions relate to causation. The causation envisaged in the income-expenditure model has implications for the sectoral balances, some of which are the focus of the present post.

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The Social Economy and the Potential Inherent in Currency Sovereignty

In any society, of whatever configuration, production at a given point in time is limited by certain ‘real’ (meaning non-monetary) factors. Notably, a society’s productive activity will always be limited by access to natural resources, the current state of its technology, and the skill, strength, size and imagination of its people. These and similar factors determine the absolute productive potential of a society. At a given point in time, these factors would apply even if, hypothetically, a society happened to be organized in a completely different way to its current form of existence.

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Playpen

It has taken nearly seven years, but the time has finally arrived for the introduction of a playpen. This is an area for irrelevant, nonsensical, unwelcome comments that may initially have appeared elsewhere but have now been moved to this thread to reduce clutter in the rest of the blog.

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