ABSTRACT
In a modern money economy, money is essentially the state’s liability. Understanding the notion of modern money is the key to macroeconomics; unfortunately mainstream macroeconomics never quite delves into the essence of it. As a little aside a brief comment on the origin of money; although important the answer will never be unequivocal. What is less contentious though is the fact that ‘the state has fought a long crusade to impose its sovereignty over money’. Warren Mosler, owner of a hedge fund and founder of Modern Money Theory, explains the idea of ‘taxes drive money’ using a simple example. The proposition that the government needs taxpayer’s money to spend is incorrect. In any modern economy, one cannot restrict the demand for state money to be only for payment of obligations to the state. With the state being an important participant in the economy, its currency must be accepted by those who sell goods and services to the state.
