This Article works to debunk the myth of finance as intermediated scarce private capital and offers an alternative, more up-to-date theoretical framework for understanding the structure and operation of our financial system. We argue that, contrary to contemporary orthodoxy, modern finance is not primarily scarce, privately provided, and intermediated, but is, in its most consequential respects, indefinitely extensible, publicly supplied, and publicly disseminated. At its core, the modern financial system is effectively a public-private partnership that is most accurately, if unavoidably metaphorically, interpreted as a franchise arrangement. Pursuant to this arrangement, the sovereign public, as franchisor, effectively licenses private financial institutions, as franchisees, to dispense a vital and indefinitely extensible public resource: the sovereign’s full faith and credit.
Loanable funds
in Cornell Law Review
This is the paper I will give at this year's System Dynamics conference in Bergen, Norway, on August 4-8 2024. It should be of use to anyone trying to argue sense with politicians.
Abstract
Modern Monetary Theory (MMT) is a non-mainstream economic theory that contradicts conventional economic analysis of government debt and deficits. We use the system dynamics program Minsky to develop a mathematical model of MMT. This model shows that the core tenets of MMT are correct, and Neoclassical arguments about government debt and deficits are wrong.