Monetary Realism

Understanding The Modern Monetary System…

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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363 Responses

  1. beowulf says

    The world is full of people, across the political spectrum, who wish to use govt to coerce others to behave as they wish. Tom isn’t one of them. As Thomas Jefferson put it, “it does me no injury for my neighbor to say there are twenty gods or no God. It neither picks my pocket nor breaks my leg.”

  2. Tom Hickey says

    FDO15, this has nothing to do with MMT and if you don’t like my position, lump it. I don’t like your position either.

  3. Cullen Roche says

    Double that!

  4. Michael Sankowski says

    Well, cool.

    I had looked up a bit about one of the names I happened to run across when we were emailing, and the contrast in what I saw and what you write about is large.

    Sounds like it works for you. Not everyone could live like that.

    Have you read any of the Culture novels by Iain Banks? If you like Sci Fi you might find them interesting. It’s about a communist technological utopia, and their version of the CIA, and much more too.

  5. Michael Sankowski says


    Hey bud, this is the sort of sh&t you MMTers need to keep in your crazy cult meetings and never let anyone else know about. Jesus, the more I learn about you guys the more extremist you are!

    FD – keep it cool. Really.

    We live in a democracy, and Tom isn’t evil.

  6. FDO15 says

    Hey bud, this is the sort of sh&t you MMTers need to keep in your crazy cult meetings and never let anyone else know about. Jesus, the more I learn about you guys the more extremist you are!

  7. Tom Hickey says

    “This sounds much less wacky than “left of communism”.”

    I should clarify that further, Mike S., since this is really key to understanding my personal viewpoint. When I say “to the left of Communism” I mean no “dictatorship of the proletariat.” As Bakunin told Marx, that was a huge mistake. Bakunin warmed Marx where it would lead, which of course it did.

    My view is going directly to “anarchism” that resolves the trifecta of liberty, equality and community directly at the grass roots level in communities based on consensus instead of hierarchy and authority, which have not been successful in dealing with this trifecta other than by creating illusions through the smoke and mirrors of mass propaganda.

    I have lived most of my life since the late Sixties, after leaving the military, in such communities and I regard that that type of organization as superior to the hierarchical authoritarian model that prevails in “normal” society. Actually, we say among ourselves that we live in the sane asylum” and sometimes need to out into the “insane asylum” to interact for one reason or another. Then we don a disguise and act “normal” while doing so.

    It is possible to live like this right now. Millions of people are happily doing so as we speak. And no, most of them aren’t living off the grid, either. This is the basis of Occupy, btw.

  8. Michael Sankowski says

    :) This sounds much less wacky than “left of communism”. It’s idealistic and hopeful.

  9. Imtheknife says

    I think the commenter is confusing vertical *money creation* with vertical *transactions* here.

  10. Tom Hickey says

    I agree with those who think that a community of actual human beings rather than animals still working toward becoming fully human would recognize their species nature and cooperate and coordinate as a species to make life as good as it possibly can be for all. Remember the motto, of the three musqueteers? It’s “All for one and one for all.”

    The political challenge that humanity is working on is realizing the motto of the French revolution — liberté, éqalité, fraternité. This is the political trifecta yet to be resolved. It will take increasing collective consciousness among humans to realize it as a species. As yet relatively few have been able to do so.

    Why is this to the left of Communism? It is the state that Marx envisioned as the goal for a race that is truly free and capable of self-determination as a species, in which all can freely realize their “species-nature,” i.e., humanity, along with individual potential, which is unique. It is also preached in the Gospels and taught in perennial wisdom. It is the ideal that humanity pays lip-service too, although many also scoff at it as ridiculously impractical and highly improbable, if not impossible given what we are. They speak for themselves and reveal what they are.

    Here is a post by Peter Singer, Professor of Bioethics at Princeton and Laureate Professor at the University of Melbourne, entitled Are Humans Getting Better?

    As a species we are doing better but we aren’t anywhere near there yet.

  11. Cullen Roche says

    It is interesting though….the more you pry the politics out of MMTers the more extreme left you realize they are. Which is fine I guess, but something they’re not very upfront about….and for good reason.

  12. Cullen Roche says

    Good question! I would have assumed that means he’s in favor of nationalized banking, but he said otherwise….

  13. Michael Sankowski says

    “Cullen, I am to the left of Communism.”

    What does this even mean? :) I don’t get it!