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The focus on a monetized production economy is, for many post-Keynesians, a distinctive feature of the post- Keynesian school. Thus, it comes as no surprise that post- Keynesian monetary theory claims to be distinct from orthodox monetary theory. In the next section of thischapter, we go over the main claims of the post- Keynesian theory of money, credit and finance. In the third section, we put these into historical perspective. The fourth section deals with what has perhaps attracted the greatest amount of attention – the controversies between horizontalists and structuralists in post- Keynesian monetary theory. The fifth section is a discussion of the new developments in monetary policy implementation. The sixth section deals with the implications of these developments in the aftermath of the subprime financial crisis, while in the seventh section we assess these implications for public finance theory, tackling the socalled ‘neo- chartalist’ view. Finally, in the eighth section we discuss the integration of post- Keynesian monetary economics into post- Keynesian macroeconomics.
The purpose of this chapter is to help teachers in presenting the main features of a modem financial system. To do so, the T-accounts of banks and central banks, where assets must by necessity balance with liabilities, will be presented in a systematic way, starting from the simplest pure credit economy, with a single bank and without central banks and outside currency. Complications will be gradually introduced, such as competing private banks, a central bank and its reserve requirements, and then, at a later stage, the State with its financial requirements and its issues of government bonds. Recent developments in banking, such as capital adequacy ratios, zero-reserve requirements, repos, securitisation, and electronic money will also be discussed within the framework of the T-accounts.