Modern Money Theory and the monetary system: a response to critics

Eric Tymoigne

Chapter 33 in The Elgar Companion to Modern Money Theory, 2024, pp 420-432 from Edward Elgar Publishing

Abstract: Critiques have argued that Modern Money Theory (MMT) conceptualization and understanding of monetary systems are either underdeveloped or incorrect. MMT minimizes the role of private banks, ignores evidences of primitive money and the role of barter, and overemphasizes the role of fiat. This leads to the ignorance of the plurality of monetary instruments and a lack of recognition of the role of liquidity preference and the endogeneity of money. This chapter shows that everybody can create monetary instruments and all them are chartal. Chartal does not mean state; it means ticket or token, which implies that all monetary instruments are financial in nature. As such, financial mechanics and liquidity preference are at the core of monetary systems, and fiat is not what drives the demand of government monetary instruments. Modern monetary systems emerged out of the needs of command economic systems and have evolved to accommodate broader economic needs.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2024
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