In: Blog30 Dec 2011
By: Andrea Terzi
The Economist (Dec 31, 2011) gives a good fair account of neo-chartalism, and a momentous recognition of Warren Mosler’s long fight to have it accepted!
Like all new (and meaningful) views of the world, neo-chartalism develops from a number of forerunners, whose ideas are revamped under a new format.
Built on a clever use of accounting relationships, it explores the consequence of national states holding the power of using their own IOUs as means to acquire output from the private sector.
It is not a theory based on a set of assumptions. Rather, it can be effectively taught by removing assumptions from traditional monetary theory. It far more resembles the discovery that those round pieces sitting in the corner can be used as wheels!
Neo-chartalism is core to understanding how monetary economies operate—thus providing a powerful account of the cause and consequence of government deficits and surpluses, trade imbalances, private savings, changing prices, job losses or creation.
It does not provide an answer to the question of big vs. small government (this is not a monetary issue). Rather, it provides a compelling argument of how to achieve full employment and price stability—and this is precisely what the global economy needs today.