From Bill Mitchell and Warren Mosler December2018 billy blog entry and mosler's MMT white paper (google docs) 2019. Some highly aggregated stocks and flows and boundaries introduced.
Sectoral balances are relationships among money flows during an accounting period. Where we perceive accumulations of past imbalances to be accrued is another matter....
Modern
Monetary theory (MMT) has shown how modern monetary systems actually work. It
has shown that governments that issue
their own currency, such as the US, can never run out of money or be forced to
default on debt issued in their own currency. It has also demonstrated that
government spending to stimulate the economy is logical and that the resulting
deficit is irrelevant - the government always has the monetary means to eliminate
it. This directly contradicts neoliberal doctrine that wants to limit
government spending and posits that deficits destabilize the economy.
Neoliberalism often constitutes a 'worldview' and 'personal identity'. Those
who hold such strong beliefs cannot be persuaded to abandon them using
rational arguments and facts - psychological reasons usually impede it as research
has shown. The worldwide dominance of the
doctrine, vested interests and psychologically grounded opposition suffocate
MMT and rational arguments showing its superiority are seemingly of no avail.
Sectoral balances are relationships among money flows during an accounting period. Where we perceive accumulations of past imbalances to be accrued is another matter....
From Bill Mitchell and Warren Mosler December2018 billy blog entry and mosler's MMT white paper (google docs) 2019. Some highly aggregated stocks and flows and boundaries introduced.
This model illustrates the current practice and consequences of government spending. Following the
direction of the arrows from right to left the model shows the following sequence
based on current practice:
Government
Spending at a certain point leads to spending in excess of tax receipts. This
will automatically lead to the issue of treasuries in the belief that the excess
spending must be financed by borrowing (although the government has the capacity
to create money). This in turn will
increase the national debt.
Consequences that follow from this practice:
1) That national
debt increases whenever the government spends in excess of tax receipts.
2) That the
government must pay interest on the debt issued, which in turn increases and
reinforces the need for government spending.
3) That the
interest paid on treasuries will increase private sector income.
There is an
alternative view, supported by Modern Monetary Theory, of how government spending
can proceed. Please see this Insight:
