Monetary Realism Recommended Reading

What is Monetary Realism (MR)?

Monetary Realism (MR) is a set of understandings that help to describe how the monetary system functions (see here for our full primer). This system is deep, complex and often misunderstood. We hope to bring balance and objective insights to the discussion in order to clarify many of the misconceptions about money, economics and the monetary system. Our goal with MR is to focus on the core operational realities of the economy while any policy ideas are entirely peripheral to MR.

Our mission here is to provide an unbiased and apolitical (as best that can be achieved!) perspective of the monetary system. We want to educate the public so that they can obtain a better understanding of the system and make more informed decisions. In keeping with this educational approach we hope the reader will not be afraid to offer their own policy ideas, critiques of MR and utilize the comments for furthering education.

MR was established in 2011 by Cullen Roche, Michael Sankowski, Carlos Mucha, Brett Fiebiger and JKH (who can’t be named for professional reasons).  We are primarily market practitioners who have come to the conclusion that most economists just don’t understand the financial world as well as most people think. Through our extensive real-world understanding in banking, futures markets, law and investment management we have developed an “in the trenches” view of the monetary battle field. We have developed MR in large part to try to develop a more realistic and pragmatic view of the monetary system and the world of money by viewing it thru the lens of operational understandings as opposed to the theoretical and often flawed perspective that some economists utilize.

Below are some of our core views:

  • Monetary Realism is different from most mainstream and most heterodox schools of economics in that we view money as a predominantly private sector formation. That is, while states establish the unit of account the actual creation of money and assets denominated in those UOAs is done by the private sector. The state actually has far less control over these matters than most economists presume.


  • We think that economics should take a more operational and engineering based approach to understanding the economy and monetary system.  Therefore, we focus on operational realities of the current monetary system and leave policy conclusions open for discussion.


  • Monetary Realists believe markets are made up of irrational participants residing in a complex dynamical system.  Therefore, we reject the efficient market hypothesis, rational expectations and general equilibrium.


  • We note that a modern capitalist monetary economy runs on income.  One entity’s spending is another entity’s income.   Therefore, the monetary economy is comprised of a “flow” of monetary transactions that generate income and revenue that allow entrepreneurs and consumer to produce and consume goods and services.


  • We view business investment as the backbone of private sector saving.  A monetary economy is only as good as the output that money gives one access to, therefore, we should recognize the importance of business investment in the process of production and innovation.


  • We view government as a facilitating entity within the monetary system whose support structures can be used to stabilize the economy at times if it is used properly.


  • We believe in the importance of understanding the monetary system as it exists and not how we want it to exist.  MRists attempt to understand what can be by reversing engineering what has been.  Therefore, understanding the system for what it is is central tenet of our approach.


  • We believe in the importance of understanding institutions as they exist with regards to their relationship to one another.  Institutional structures are the “pipes” of our economic plumbing.  If you want to understand the system you need to understand the piping.


  • The monetary system is a system made up of financial assets therefore we believe in the importance of understanding the accounting that comprises these financial assets.


  • We believe in the importance of using this accounting and institutional understanding to comprehend the sector financial balances within the monetary system.


  • We view banks as important distributors of money or bank deposits which make up the dominant medium of exchange.  Therefore, an in-depth understanding of banking is crucial to understanding the monetary system

To obtain  a better understanding of Monetary Realism we recommend the following reading (some of which is quite advanced):

1.  Understanding The Modern Monetary System

2.  The “Dismal Science” and Getting Back to Da Vinci’s Methodology

3.  Economics as Engineering

4.  Understanding Inside & Outside Money

5.  Understanding Moneyness

6.  Credit IS Money

7.  The Disaggregation of Credit

8.  Where Does Cash Come From?  

9.  The Human Body, The Economy & The System of Flows

10.  Understanding the Fed’s Primary Purpose

11  JKH on Saving, Investment and S=I+(S-I)

12. The Treasury and Central Bank: A Contingent Institutional Approach

13.  Saving, stock/flow consistency and Kalecki

14.  Banking in the Abstract

15.  Some Simple Banking Examples

16.  What Makes Monetary Realism Unique?

* Some of these documents use the term MMR to refer to MR.  These were published prior to the official name as MR.  


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