Visualizing How Money Works


My continued research into solutions for some of our most pressing societal issues led me to an incredibility good book that simplifies the concepts behind modern monetary theory. Author J. D. Alt uses visualization to simplify the theory, making how money works easier to understand. His book – Diagrams and Dollars – was recently added to my Book Library. The book’s premise is that we have the way money is created and its flow through the system backwards.

Mr. Alt starts with a visual of the common view of where money is initiated and how it flows between the private sector and the federal government. That view looks like this:

Common view of Money Flow

As the author describes, this view has the flow backwards. Money initiates from a sovereign government and flows to the private sector. This lies at the heart of modern monetary theory. The correct flow would look quite different:

How Money Works

The visual needs some explaining, but I will leave that to the book. It is a short read, and I highly recommend it. So, into my Book Library goes Diagrams and Dollars. The books abstract is included below.

ABSTRACT

Many economists and budget theorists are now debating the realities and implications of a new understanding about MONEY. Modern Money Theory (or MMT) is a term that pops up more and more in mainstream discussions about our current economic malaise and National Budget. On the one hand, the new understanding seems to hold out great possibilities, but on the other it seems highly improbable, if not impossible. There is much disagreement even among the economists themselves —and for those of us who are not economists, the topic seems overwhelmingly complicated.

This small eBOOK is an attempt to illustrate the basics of this debate for the “non-economist”. My hope is that in making the basic concepts more visible, the topic—and its remarkable implications for our National Budgeting process and collective well-being—will become more widely discussed.

 

 

 

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