Understanding Monetary Realism – the Series

I broke this down over at Pragcap over the last week and wanted to post each piece here.  I know some people learn more easily by reading in small chunks.   Also, a huge thanks to JKH, Brett Fiebiger, PhD, Mike Sankowski and Carlos Mucha for piecing this all together.  MR has become much bigger than I envisioned and the guys have all put in a huge effort.  I can’t even begin to take credit for what it’s developed into.  JKH and Brett in particular dove deep into some of the details and have provided some incredibly unique insights that make us all smarter and better informed.  So thanks to everyone and I hope this series provides a better learning platform for understand the monetary system in which we reside.

Part 1 – Introduction

Part 2 – The Basic operations of a fiat monetary system

Part 3 – The lead role of the private sector

Parts 4 & 5 – Understanding the true constraint for an autonomous currency issuer

Part 6 – Sectoral balance economics and S = I+ (S-I)


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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10 Comments on "Understanding Monetary Realism – the Series"

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Robert Rice
4 years 11 months ago
I briefly skimmed the first two entries Cullen, and I didn’t notice any mention of the following: The Treasury can issue paper money, and not simply on behalf of the Fed. The SCOTUS ruled as much in 1862: http://en.wikipedia.org/wiki/Legal_Tender_Cases Subsequent to this ruling, for over a 100 years (until 1971) the Treasury issued paper currency, otherwise known as United States Notes: http://en.wikipedia.org/wiki/United_States_Note The reason they stopped seems to be twofold: 1. Redundancy. “United States notes serve no function that is not already adequately served by Federal Reserve notes. As a result, the Treasury Department stopped issuing United States notes, and none have been placed into circulation since January 21, 1971.” http://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx 2. Limitation on the quantity: ” The amount of United States currency notes outstanding and in circulation— (1) may not be more than $300,000,000;” http://www.law.cornell.edu/uscode/text/31/5115 I don’t know why we don’t update that limitation by adding five zeros (the limit would become 30 trillion). As an aside, a few things: 1. I’m glad to see you guys getting away from that nonsense MMT perpetuates about taxes “destroying” money and Federal government spending “creating” money. The latter is of course partially true when the Federal government has in fact created money to spend, but taxes do not by their very nature destroy money, and spending does not by its very nature create money… The fact is, the Federal government, in addition to being a currency issuer, is also a currency recycler, i.e. they print, spend, tax or borrow, and respend. Round and round the money goes. They can destroy and create, but that isn’t always the case. 2. It appears you may have incorporated my thesis on open market operations having the ability to create non-government sector net financial assets (for example, QE renders the primary dealers flush with reserves/money… Read more »
4 years 11 months ago

looking forward to finding time to read this.