The Money View and MMT

[Brian Flaherty]

Hi all,

I'd like to start a discussion or gather thoughts on the connection between the Money View and Modern Monetary Theory.

For anyone who is unfamiliar, the Money View is a school of thought developed by Professor Perry Mehrling, now at Boston University. In a nutshell, the Money View sees the economy as a web of interlocking balance sheets and promises to pay, disciplined by the settlement constraint. The best intro to the Money View is Perry's free MOOC hosted on Coursera. 

There are several strong overlaps between MMT and the Money View -- I view the two schools as fellow travelers:

• The Primacy of Money: Traditional schools largely view the economy as a barter system between aggregate supply & aggregate demand. Both MMT and MV reject this, recognizing the primacy of money, that money plays a crucial and unignorable role in mediating economic activity.

• The Endogeneity of Money: Both MMT and MV recognize that money is not an exogenous variable determined by some independent factor (ie interest rates). Instead, money is capable of being created endogenously, by actors inside the system.

• Balance Sheet Analysis: Both MMT and MV take an accounting-based framework to understand the economy -- one person's asset is another person's liability. This framework is essential for understanding what actually happens during monetary operations.

On the other hand, there are also some significant differences between MMT and MV. Some of these are just a matter of emphasis, but they're worth pointing out:

• Price Changes: It's tricky to summarize how each school views prices in general, but MV sees price as being determined by dealers quoting an 'inside spread' in light of some fundamental 'outside spread.' In contrast, MMT tends to rely on either gaps between AD and AS or state pricing.

• Credit vs. State Money: While MMT acknowledges privately created credit money, the school focuses largely on the role of state money. In contrast, MV is mostly concerned with different flavors of credit money, both in the banking and shadow banking systems. However, both state and private money are captured in the MV's 'hierarchy of money.'

• Real vs. Financial Crises: In terms of policy, MMT tends to focus on solving real crises, such as major drops in AD or increases in unemployment. MV is less policy-focused, but the school is more interested in analyzing financial crises, such as runs on the banking system.

It's also worth noting that MMT and MV have some common intellectual ancestors, including Minsky and Copeland.

I'd be curious for thoughts from anyone who is familiar with the two schools. And if I've missed something in characterizing either one, let me know.

Best,

Brian

P.S. If anyone on the list will be attending tomorrow's Levy conference and we haven't already connected, please feel free to email me on the side.

[Jay Mills]

Brian,

Excellent work!  Does this actually summarize it:

Things to add:

1. Institutional Focus

• MMT highlights the legal and institutional structure of money (e.g., the Treasury-Central Bank nexus, the power to tax, currency monopoly).
• The Money View focuses more on market institutions (dealers, margin calls, collateral chains, global dollar markets).

2. Global Perspective

• The Money View offers more insights into the international monetary system, especially via the Eurodollar market and hierarchy of currencies.
• MMT addresses external constraints too (especially through monetary sovereignty), but not with the same granular attention to global payment systems and shadow banking

Best, 

Jason

On Jun 15, 2025, at 2:13 PM, Brian Flaherty <brianfl...@gmail.com> wrote:

Hi all,

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[Bijou Smith]

I'd pose a few questions to show one can subsume tMV into MMT. Does tMV recognize the State is a public monopoly on the State's unit of account "the dollar", yen, peso, renminbi, &c)?  

If so, then that view t(MV) should understand the State creates the markets for goods for sale in the unit of account, hence tMV is a subset of MMT analysis.

It can be true the scholars of MMT have a different focus, but it has always been understood (in MMT scholarship) that the state has simple monopoly and the secondary markets would be using some other unit of account for credit/debit if not for the state.

The "hierarchy of currencies" is largely a fiction, or psychological. There is a hierarchy of creditors, which is legally and institutionally determined, hence determined also by the State. But that is about who is at the top and bottom of the credit stack when a firm goes bust. The "currencies" are just scorepoints, and it is up to the monopoly issuer to settle who gets paid out in law court and who misses out, if at all.  One thing MMT understands is there is no essential need for creditors to miss out, since the State can choose to insure all deposits in their unit of account, public or private.  It is a political choice, not a market function, unless the state leaves that risk taken on by the private sector alone. It is a further question whether that state should insure private non-bank and shadow banks. Perhaps not, since there is a moral hazard of unwittingly supporting fraud here, I think, or at least a real cost in terms of regulatory compliance overhead.

That's my 2 cents worth. 

[Warren Mosler]

Hi,

I sent this earlier but erred in sending it only only to Brian, sorry!

On Sun, Jun 15, 2025 at 2:13 PM Brian Flaherty <brianfl...@gmail.com> wrote:

Hi all,

I'd like to start a discussion or gather thoughts on the connection between the Money View and Modern Monetary Theory.

For anyone who is unfamiliar, the Money View is a school of thought developed by Professor Perry Mehrling, now at Boston University. In a nutshell, the Money View sees the economy as a web of interlocking balance sheets and promises to pay, disciplined by the settlement constraint. The best intro to the Money View is Perry's free MOOC hosted on Coursera. 

There are several strong overlaps between MMT and the Money View -- I view the two schools as fellow travelers:

• The Primacy of Money: Traditional schools largely view the economy as a barter system between aggregate supply & aggregate demand. Both MMT and MV reject this, recognizing the primacy of money, that money plays a crucial and unignorable role in mediating economic activity.

For me the currency begins with the tax liability that specifies the tax credit. 

• The Endogeneity of Money: Both MMT and MV recognize that money is not an exogenous variable determined by some independent factor (ie interest rates). Instead, money is capable of being created endogenously, by actors inside the system.

That would be with floating exchange rate policy.

http://k.web.umkc.edu/keltons/ECON501/Mosler.htm 

• Balance Sheet Analysis: Both MMT and MV take an accounting-based framework to understand the economy -- one person's asset is another person's liability. This framework is essential for understanding what actually happens during monetary operations.

On the other hand, there are also some significant differences between MMT and MV. Some of these are just a matter of emphasis, but they're worth pointing out:

• Price Changes: It's tricky to summarize how each school views prices in general, but MV sees price as being determined by dealers quoting an 'inside spread' in light of some fundamental 'outside spread.' In contrast, MMT tends to rely on either gaps between AD and AS or state pricing.

Depends on which price. 

• Credit vs. State Money: While MMT acknowledges privately created credit money, the school focuses largely on the role of state money.

Commercial banking systems are agents of the state. 

• In contrast, MV is mostly concerned with different flavors of credit money, both in the banking and shadow banking systems. However, both state and private money are captured in the MV's 'hierarchy of money.'

• Real vs. Financial Crises: In terms of policy, MMT tends to focus on solving real crises, such as major drops in AD or increases in unemployment. MV is less policy-focused, but the school is more interested in analyzing financial crises, such as runs on the banking system.

They make fundamental errors. I was at an MV presentation in Berlin and noted their understanding of CB swap lines and their role in global monetary operations undermined the presentation. 

They didn't disagree and were presumably going to rethink it.   

It's also worth noting that MMT and MV have some common intellectual ancestors, including Minsky and Copeland.

Those are not my intellectual ancestors. 

Warren 

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'The 7 Deadly Innocent Frauds' 

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

[Jay Mills]

Hi Warren,

Who would you cite as some of you intellectual ancestors? Thanks!

Best,

Jason

[Warren Mosler]

On Mon, Jun 16, 2025 at 6:26 AM Jay Mills <jasonmi...@gmail.com> wrote:

Hi Warren,

Who would you cite as some of you intellectual ancestors? Thanks!

I never read any academic economists before the late 1990's and not many since,

and then mainly to point out errors.

I started in engineering, switching to economics after 2 years and only took 3 intro type courses.

I read Galbraith's Affluent Society and New Industrial State as the instances of 

errors of causation resonated.

I developed my understanding of monetary operations 'on the job' debit by debit, credit by credit,

logically working my way through it all.

 

Best,

Jason

> On Jun 16, 2025, at 6:22 AM, Warren Mosler <warren...@gmail.com> wrote:
>
> Those are not my intellectual ancestors.

[Jay Mills]

Thanks! Since most of us will never get on the job training, if we wanted to learn from actual people on the job - what’s jobs in government and banking would have those real world day to day knowledge that books and authors simply cannot replicate? Who knows, maybe I’ll take a field trip this summer! 

Best, 

Jason

On Jun 16, 2025, at 6:57 AM, Warren Mosler <warren...@gmail.com> wrote:



[Ryan Benincasa]

In my opinion any comparison of MMT to other schools must include acknowledging the government’s taxation creates unemployment (i.e. unemployment is a policy choice), which can only be cured through government spending, and that spending is the source of the price level in the economy. It’s coercive, so not necessarily related to supply/demand. 

It’s interesting that Mehrling created a MOOC for his Money View. I’ve used Coursera before for other topics and found it to be an effective platform. Do we think “Monetary Operations” is a subject people would be open to and/or interested in studying? I would be happy to contribute in any way useful if so. 

Ryan Benincasa
e: ryan.be...@gmail.com
c: 203.512.2743

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[Warren Mosler]

Something in Fed monetary operations?