Model supporting research of investment vs. austerity implications. Please refer to additional information on the SystemsWiki Focus Page and Modern Money & Public Purpose Video.
Model supporting research of investment vs. austerity implications. Please refer to additional information on the SystemsWiki Focus Page and Modern Money & Public Purpose Video.
Goodwin cycle IM-2010 with debt and taxes added, modified from Steve Keen's illustration of Hyman Minsky's Financial Instability Hypothesis "stability begets instability". This can be extended by adding the Ponzi effect of borrowing for speculative investment.
This model
shows the basic functioning and dynamics of a 'modern monetary system'.
The non-government
sectors, consisting of the private and foreign sectors initial y starts with
zero currency units. It is important to realize that after creating a new currency the government
must first spend currency units into the economy before they can be used:
without currency units the private sector could not even pay taxes! A government
that has its own freely floating currency can create a much money as it wants.
It does not need tax receipts to finance its spending, and any money it spends into
the economy above that collected in taxes represents income for the private
sector. The model show that the government initially created 9 trillion money units,
but spent only six trillion into the economy. The six trillion showed up as a government
deficit but as wealth in the non-government sector.
Since the government
can create as many money units as it wishes and transfer them to
the private sector to ensure an adequate
level of demand in the in the economy, austerity is unnecessary: money is available,
though real resource may be scarce. This also shows that the government can
contribute actively towards the creation of prosperity.
Please note that this model was originally
created by Gene Bellinger, IM 3206, from which this version was cloned.
WIP Social determinants of health from Michael Marmot's ABC 2016 Boyer Lectures on Social Justice and the Health Gap See US Data website for data and AIHW website for concepts. See also IM-83417 Marmot Essay 2017
WIP summaries of bill mitchell's blog postings related to the connections between macroeconomics and wellbeing, particularly via unemployment and inflation
Causal loop diagram summary of David Graeber's Book Bullsh*t Jobs with a flimsy bridge to Gene Bellinger's AI Anxiety narrative and paradox based on my Gemini interaction using Gene's AI prompts
No economy can function well without adequate funding and in the absence of finance will eventually fall into recession. Funds (financial assets in the model) are primarily injected through investments. This is certainly true for investments and payments undertaken by the government but also for private investments via bank loans. Net exports (i.e.trade surpluses) also represent an injecton of financial assets into the economy. By contrast financial assets are taken out of the economy through taxation, the repayment of bank loans and the running of a negative trade balance. Also, if the population in aggregate decides to save more this has the effect as if money were taken out of the economy. I have deliberately avoided specifying where the funds for treasury payments and public investments come from, as this is controversial. Modern Monetary Theory, for instance, says that these funds are not provided through tax revenue. Austerity can be seen as a process that deliberately diminishes or takes out financial assets from the economy through taxation, restrictions on bank loans or cutbacks in payments and public spending by the government. It is probably useful to look at insights 2740 and 2741 before examining this CLD because they provide the context and purpose for net public spending and investment.
Revisited Essence of MMT 2019 insight using Jim Byrne's popular mmt101 blog entry Modern
Monetary Theory (MMT) in 70 Bullet Points as the basis of my Gemini interaction Feb 2026 using Gene Bellinger's AI prompts for causal loop diagrams. See insight version including 2019 notes for extras
Map of Causal Structure outlined in Thucydides History of the Peloponnesian War based on Fuzzy Cognitive Map, Matt Fisher's 2017 UC Berkeley Thesis on Tragic Science and other sources (see notes (i))
WIP summaries of bill mitchell's blog postings related to the connections between macroeconomics and wellbeing, particularly via unemployment and inflation
