Modern monetary theory: A historical retrospective

Abstract

This article examines applied aspects of Modern Monetary Theory (MMT). Currently, this theory has gained popularity in wide academic circles and is the subject of wide discourse among both theoretical economists and practical economists. Scholars evaluate this theory ambiguously, and many researchers believe its main provisions are divorced from economic realities, contradictory and, therefore, not acceptable as instruments of macroeconomic policy. The author believes that the use of retrospective analysis could be productive for the verification of certain provisions of the MMT. The use of the historical experience of monetary circulation, in which similar principles were used, certainly has significant research potential. The article discusses the fundamental provisions of the MMT related to the peculiarities of the functioning of fiat money systems in a historical context. Knapp, creating his state theory of money, also relied on the Russian experience of paper-money circulation. In the presented work, using examples taken from Russian economic history, it is shown how monetary policy instruments similar to those proposed by MMT were used in the real economy. In particular, the history of the first Russian paper money-banknotes is considered. The Russian experience of paper-money circulation can be considered quite successful, because thanks to them, the financial situation of the country was quite stable, the national economy was actively developing. An important circumstance was that the models of monetary administration in Russia were applied creatively, and not dogmatically scrupulously. This is the way to approach the use of MMT in the modern Russian economy, which is under unprecedented sanctions.

Keywords:

assignats, modern monetary theory, banknotes, sovereign money, paper money