Modern Monetary Macroeconomics

Modern Monetary Macroeconomics

A New Paradigm for Economic Policy

New Directions in Modern Economics series

Edited by Claude Gnos and Sergio Rossi

This timely book uses cutting-edge research to analyse the fundamental causes of economic and financial crises, and illustrates the macroeconomic foundations required for future economic policymaking in order to avoid these crises.

Chapter 10: World monetary disorders: the mystery of the ‘missing surplus’ and of the ‘missing capital outflow’

Alvaro Cencini and Mauro Citraro

Subjects: economics and finance, financial economics and regulation, post-keynesian economics


The discovery of double-entry book-keeping marked the outset of modern economies as well as that of modern economics. From then on, the basis was laid for the emission of bank money, and for the birth of capitalism. Indeed, the very existence of an economic system allowing for capital accumulation requires that of banks as institutions carrying out the double role of monetary and financial intermediaries. The recording of debts and credits is the essence of this twofold intermediation. According to the principle of double-entry book-keeping, each transaction is entered twice in the balance sheet of the bank carrying it out. Yet this is only half of the picture. If payments simply implied the payer being debited and the payee being credited, the introduction of bank money would not be as revolutionary an event as the contributors to this volume have been, more or less explicitly, arguing throughout their work. As a matter of fact, each payment is double-entered twice, once with respect to the payer and once with respect to the payee. This may be easily illustrated, for example by referring to the purchase of output. When income holders spend their initial earnings for the purchase of an output, they are both credited and debited by their bank, as are the sellers of the purchased output. This is so because the bank acts as an intermediary, and money is a simple catalyst, a means of payment, and not the object of the payment. Thus, the bank issues money to the benefit of the payer–it credits the payer with a positive amount of money–and carries out the payment on his behalf: it debits him with an equivalent amount. Simultaneously, the bank credits the payee with the same sum of money, and debits him by making him a bank deposit holder. Thanks to double-entry book-keeping, money can indeed be the subject of a double credit and of a double debit, which is perfectly in line with its nature as a flow.

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