MR and the Diagonalist View of Money

Recent debates have led to some fruitful discussions and circled back to a point that Steve Waldman made several months ago.  He referred to the MRists as “Diagonalists” – neither verticalist nor horizontalist, but a hybrid of both.  While I didn’t initially like the term, it is an accurate description of the path we’ve chosen (though we are open to terms that, as Carlos says, don’t sound like a rock band!).

Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit.  Verticalists (like MMTers) will generally shun policy that works through horizontal money creation in favor of policy that works through the vertical component (consolidate govt work and through the the JG, fiscal policy, eliminate monetary policy, etc) influencing net financial assets.   MR takes a more balanced approach to the monetary system.

The key here is understanding that we are not closed minded to monetary policy or fiscal policy in the approach to maintaining and influencing the balance of financial assets in the economy.  Although MR does not embed specific policy in our approach, we understand that policymakers should remain flexible and open to any and all environments.  The economy is a dynamic system and requires great flexibility in managing.  In this regard, we should never claim that any single policy is a one size fits all policy.  Instead, we take the approach of “better to have and not need than need and not have”.

Perhaps most importantly (and keeping in-line with our focus on operational realities), we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component).  The horizontal component does not exist to serve public purpose.  Rather, it exists because the US monetary system is designed to disperse power away from a centralized government (it just is what it is, whether workable or not, right or wrong).  In this regard, we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured.   This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses.

So, we’ll be going on a summer tour this year playing in a town near you.  As the creator of the band’s name Steve Waldman is responsible for the band’s bills, tour bus and extracurricular activities.   If someone could send me his billing address we’ll get started immediately.   🙂

* Thanks to Ramanan for pointing out an important distinction here. Vertical and horizontal refer to the varying forms of money creation as described in MMT literature and not the ideas of Basil Moore.  Vertical refers to NFA creation via cumulative budget deficits while horizontal refers to endogenous money creation through the process of loan creation via private banks.  See here for more.  


Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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Horizontalists … will generally focus primarily on private credit and ways that policy can influence private credit. Verticalists … will generally shun policy that works through the horizontal component in favor of policy that works through the vertical component…

I don’t think there’s any such dichotomy.

All policy proposals ultimately aim to have a horizontal effect, via some sort of vertical action.

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