Understanding Modern Money: The Key to Full Employment and Price Stability

Understanding Modern Money: The Key to Full Employment and Price Stability

Understanding Modern Money: The Key to Full Employment and Price Stability

Understanding Modern Money: The Key to Full Employment and Price Stability

Synopsis

Understanding Modern Money exposes flaws in the foundations of mainstream macroeconomics and suggests a better way to formulate policy that will benefit everyone living in capitalistic societies.

Excerpt

The Conservative belief that there is some law of nature which prevents men from being employed, that it is 'rash' to employ men, and that it is financially 'sound' to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable--the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years... Our main task, therefore, will be to confirm the reader's instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our wellbeing, is what it looks like--a bogy. (Keynes 1972, pp. 90-92)

In a letter to George Bernard Shaw on 1 January 1935, Keynes wrote 'I believe myself to be writing a book on economic theory which will largely revolutionise--not, I suppose, at once but in the course of the next ten years --the way the world thinks about economic problems.' Keynes's claim turned out to be true; his book did indeed revolutionize economic theory and in far less than a decade. However, by the late 1970s, the Keynesian paradigm had splintered into 'Keynesian', 'monetarist' and 'supply-side' factions, and by the end of the 1990s very little of the Keynesian revolution remained. In some respects, the theory presented here returns to the analysis of Keynes, but I have purposely avoided doctrinal debates in the hope that there would be nothing in this book that Keynesians, monetarists or supplysiders should have difficulty in accepting.

As I note at the end of this section, there are a number of other economists who are developing similar arguments, primarily for publication in academic journals. My purpose here is to introduce these ideas in a manner that will make them clear to a reader with a strong, but not necessarily academic, background in economics. Perhaps more importantly, this book synthesizes theoretical and policy-oriented research that investigates modern money, government spending and deficits, inflation and employment into what is intended to provide a coherent and unified exposition. It is hoped that this present analysis is only the opening 'salvo'

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