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TagModern Monetary Theory (MMT)

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Businesswoman Signing Cheque

Mental Models for What Government Does With Our Money

Models used by pedantic experts, even if more accurate, confuse instead of clarify the key difference between taxation and government debt

We live by mental models. Although we rarely take the time to think about it, any time we reason about something we are using a mental model. Sometimes those models are close to reality, and sometimes they are not. When you turn your steering wheel, it does in fact turn your tires — but power steering adds quite a bit of assistance. So the mental model is close to correct but not exactly true. Similarly, in chemistry, multiple models of the atom are usually taught. In the widely used Rutherford model (also called the “planetary model”), electrons “orbit” the nucleus at different distances. However, this model was not found to be precisely true. A more precise view of the atom…

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Concept idea of FED, federal reserve system is the central banking system of the united states of america and change interest rates. Percentage icon and arrow symbol on wooden cube

Central Banks vs. Cryptocurrencies: Why the Growing Tension?

Modern Monetary Theory (MMT), which is gaining ground, holds that government should just print as much money as it feels it needs and then raise taxes to cover shortfalls

On the way to explaining how a cryptocurrency system might work, financial analyst Bernard Fickser asks readers to think about the crucial difference between money, as held by a private bank — we’ll call it Merchant Navy Bank — and a central bank operated by a government, say the U.S. Federal Reserve System (the Fed). In his short online book, The Creation of Money, Fickser distinguishes between private banks and central government banks. Private banks start with money that already exists. The money that Merchant Navy Bank lends for mortgages, for example, is contributed by depositors who agree to tie up their money for several years in savings certificates. In return, they get a higher than average rate of interest.…