Deficit Owls | Foundations of Modern Monetary Theory @deficitowls5296 | Uploaded June 2018 | Updated October 2024, 7 hours ago.
Rohan Grey, President and Founder of the Modern Money Network, discussing some of the foundational logic behind Modern Monetary Theory.
Following anthropological evidence, MMT begins its origin story of money not with people bartering goods, but with tribal soceities in which barter was unnecessary because everybody knew each other. When your primary trading partners are your family and friends, it's not necessary to place exact numerical terms on who's giving what to whom. Instead, in these societies we observe informal credit relations: you give me that and I'll owe you something roughly equivalent later.
It seems more likely that the idea of making exact value comparisons between objects arises from codes of punishment for bad behavior. To avoid anger, blood feuds, and cycles of revenge, justice for crimes must be doled out in exact quantities. The authority for setting these quantities forms the precursor to what we today call "the state," and these authorities would find it convenient to express penalties for each different crime using a common measuring unit, a "unit of account," often based on a weight of grain. This is the origin of prices.
As groups grow too large for face-to-face relationships to be the rule, informal debt relationships gave way to formal, transferable debt relationships, where you might hold my IOU, but you could sell my IOU to somebody else in exchange for goods. These IOUs would get denominated in the unit of account created by the authority, making the debts quantifiable.
State money comes in when the authority, rather than demanding that fines or taxes be paid with goods, begins issuing its own IOUs (denominated in the same unit of account) and accepting these back in payment. So, the state money system becomes a vehicle for moving real resources from the private sector to the public sector. Once this system gets going, citizens may find it convenient to use state money for their own private transactions, but this is built on top of the circuit of state money, which flows from the state to the private citizens when states purchase resources, and then from the citizens back to the state when taxes are paid.
Watch the full video here: youtu.be/Yror3i1TRjk
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Rohan Grey, President and Founder of the Modern Money Network, discussing some of the foundational logic behind Modern Monetary Theory.
Following anthropological evidence, MMT begins its origin story of money not with people bartering goods, but with tribal soceities in which barter was unnecessary because everybody knew each other. When your primary trading partners are your family and friends, it's not necessary to place exact numerical terms on who's giving what to whom. Instead, in these societies we observe informal credit relations: you give me that and I'll owe you something roughly equivalent later.
It seems more likely that the idea of making exact value comparisons between objects arises from codes of punishment for bad behavior. To avoid anger, blood feuds, and cycles of revenge, justice for crimes must be doled out in exact quantities. The authority for setting these quantities forms the precursor to what we today call "the state," and these authorities would find it convenient to express penalties for each different crime using a common measuring unit, a "unit of account," often based on a weight of grain. This is the origin of prices.
As groups grow too large for face-to-face relationships to be the rule, informal debt relationships gave way to formal, transferable debt relationships, where you might hold my IOU, but you could sell my IOU to somebody else in exchange for goods. These IOUs would get denominated in the unit of account created by the authority, making the debts quantifiable.
State money comes in when the authority, rather than demanding that fines or taxes be paid with goods, begins issuing its own IOUs (denominated in the same unit of account) and accepting these back in payment. So, the state money system becomes a vehicle for moving real resources from the private sector to the public sector. Once this system gets going, citizens may find it convenient to use state money for their own private transactions, but this is built on top of the circuit of state money, which flows from the state to the private citizens when states purchase resources, and then from the citizens back to the state when taxes are paid.
Watch the full video here: youtu.be/Yror3i1TRjk
Follow Deficit Owls on Facebook and Twitter:
facebook.com/DeficitOwls
twitter.com/DeficitOwls
And follow our sister page, Modern Money Memes:
facebook.com/ModernMoneyMeme
twitter.com/ModernMoneyMeme
