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Understanding the Modern Monetary System – Newly Updated Version

About once every 18 months I try to update my paper ” Understanding the Modern Monetary System” to account for important new understandings and potential evolutions in the monetary system.  It has essentially become a living paper which I think is appropriate since I think of the financial system as an evolving system.  Given my somewhat heterodox views the paper has evolved over the years to account for what is essentially my own set of understandings wrapped within a framework of both orthodox and heterodox economic understandings. I’ve tried to make the views truly apolitical and independent of a particular “school” of economics so as to avoid any political conflicts and ideologies.

To my surprise, the paper has become tremendously popular. It is now the 9th most downloaded paper in the entire SSRN database and has consistently ranked in the top 10 annual downloads for the last 5 years.  This latest version is the one I am most proud of. I think it most accurately reflects my own set of operational understandings.

I’ve added several elements to the paper including:

  • A more expansive explanation of what “money” is in most modern monetary systems.
  • Some essential accounting that will help better round out the understandings.
  • A more expansive perspective on Monetary Policy and how it works.

You can download the latest version for free here.  If you’ve already read it it might be worth browsing through again just to refresh basic ideas. And if you haven’t read it yet I hope you find it to be helpful and educational. And you know where to reach me if you have questions.