Modern Money Theory

This book, a revised new edition, examines how money is created and how it functions within global exchange rate regimes to highlight how monetary policy can promote economic growth, full employment, and price stability. It provides an introduction to the basics of macroeconomic accounting and the domestic monetary system, as well as fiscal operations, tax policy for sovereign nations, and alternative exchange rate regimes. New topics, including central bank clearing, responses to the COVID-19 pandemic, the rise of inflation, and how to finance a Green New Deal, are also discussed. Since the second edition was published in 2015, Modern Money Theory (MMT) has been in the news with great frequency. First condemned as “crazy talk”, it was embraced in the depths of the COVID-19 pandemic as a “new” way to finance the $5 trillion response by the administrations of both Donald Trump and Joe Biden. MMT remains in the news as its proponents reject the mainstream’s analysis of the causes of the post-pandemic inflation that has hit much of the world. It also offers an alternative approach to dealing with inflation, arguing that relying on high interest rates is misguided and causing unnecessary pain. Modern Money Theory provides the reader with a framework for understanding real world economies. It will be relevant to students, researchers, and policymakers interested in monetary policy and modern money theory. L. Randall Wray is Professor of Economics at the Levy Economics Institute of Bard College. He was invited to present on MMT before the Congressional Budget Office, and to give testimony before the House Budget Committee. The Chairman of that Committee, John Yarmuth later gave a remarkable interview in which he cogently summarized and endorsed the main conclusions of MMT.