Research Topics

This working paper integrates the credit money approach (associated with Post Keynesian endogenous money theory) with the state money approach (associated with Modern Money Theory) by drawing on Wray’s 1990 book (Money and Credit in Capitalist Economies: The Endogenous Money Approach, Edward Elgar), his 1998 book (Understanding Modern Money: the Key to Full Employment and Price Stability, Edward Elgar), and his 2004 edited book (Credit and State Theories of Money: The Contributions of A. Mitchell Innes, Edward Elgar). New sources and interpretation of the history of money make it clear that there is no contradiction between state money and private credit money—each played a role in the creation of the modern monetary system. Indeed, today’s system was created by bringing state money into the private money giro, thereby strengthening both.
 

The Advantages of Owning the Magic Porridge Pot

Over the past two decades there has been a revival of Georg Friedrich Knapp’s “state money” approach, also known as chartalism. The modern version has come to be called Modern Money Theory. Much of the recent research has delved into three main areas: mining previous work, applying the theory to analysis of current sovereign monetary operations, and exploring the policy space open to sovereign currency issuers. This paper focuses on “outside” money—the currency issued by the sovereign—and the advantages that accrue to nations that make full use of the policy space provided by outside money.