Modern Monetary Theory - A Primer on the Operational Realities of the Monetary System

Abstract

At its core, there are two parts to Modern Monetary Theory (MMT). The first is a description of how the monetary system actually works, mostly focusing upon interactions between the central bank, the treasury, and the financial system, though this part also requires a very thorough understanding of the Minskyan-related literature of many MMT’ers. The second is a set of policy proposals that arise from this description and is largely outside the scope of this particular post but which can be found in any number of MMT publications and blogposts. Of critical importance to most of MMT’s description of the monetary system is its elaboration of the system’s realities. This post provides a detailed description of what operational realities means in MMT, and then applies it to a number of core issues related to the monetary system.