L. Randall Wray’s Understanding Modern Money: The Key to Full Employment and Price Stability is a wonderful work on the concept of money and its usage. This book published by Edward Elgar Northampton, MA in 1998 presents a 200 page analysis of fiscal approach and is considered to be a must reading for students and enthusiastic alike. L. Randall Wray’s book is divided into eight chapters.
These can be enumerated as Introduction, Money and Taxes: The Chartalist Approach, An Introduction to a History of Money, Government Spending, Deficits and Money, Monetary Policy: Interest Rate Targets and the Non-Discretionary Nature of Reserves, Employment Policy and the Value of the Currency, The Logic of the Taxes-Drive-Money View and Conclusions. The main purpose of the paper is to summarize all 8 chapters of the book. This paper would write summaries of each chapter with the personal thoughts and the conclusion.
To be precise the bulk of the paper would consist of summary of the main findings of the text, and a conclusion on the issues discussed. Chapter 1: Introduction The Introduction deals with the basic understanding of the subject of money and monetary transactions under the perspective of capitalist economy. According L. Randall Wray a better understanding of the system of money can easily illuminate a whole new world of fiscal policies and approach. L.
Randall Wray exemplifies the deficits of the government and makes statements that it is better to understand the basics of the problem rather than criticizing it without recognizing the bits and pieces of the actions. According to the author it is as important in fiscal awareness to analyze the bits and pieces as it is important to understand the nature of the bigger picture. L. Randall Wray also makes good use of the Maastricht Treaty to relate the fact of looking at the perspective of the finance in a more understanding manner.
However, it can be mentioned that the introduction chapter chiefly relies on the presentation of a fundamental settlement on the balance of budget with a greater emphasis than anything else. But it could be stated that L. Randall Wray might not have placed so much emphasis on the subject alone or might not have advocated the policies with such affirmations. It is believed that while approaching a text it is better to leave few nooks and corners for the readers to analyze on their own. In this case the author L.
Randall Wray elaborates too many things on policies and budgeting systems and at times it may appear like a spoon feeding exercise too. Alongside it should also be mentioned that this approach is basically very lucrative for students and as the target audience in this case comprise mostly the students the author L. Randall Wray may be regarded as a successful representative of the genera of writers who makes learning such an enjoyable experience. Chapter 2: Money and Taxes: The Chartalist Approach
This chapter deals with the nature of the Chartalist Approach which in the author’s own word is basically the “taxes-drive-money” (Wray, 18, 1). His understanding or better to say identification, of the subject is basically composed on the method and formulation of Kenneth Boulding, Abba Lerner and Hyman Minskyrather than using the more famous approach of John Maynard Keynes and Adam Smith or Knapp, Smith and Keynes which could be enumerated as the money approach of the endogenous manner. L.
Randall Wray method of choosing the Chartalist approach appears to be quite different and relevant under the perspective of modern economy and its fiscal accessories. For this purpose L. Randall Wray elaborates money as a state element or creature as the concept of money is impossible to conceive without the inclusion of the concept of state in the modern perspective of fiscal approach. According to L. Randall Wray this is extremely important because payments and circulation of the monetary system mainly depends on the state in forms of taxes and other channels.
Furthermore under this condition of Chartalist approach L. Randall Wray indicates that the state or the government must hold the extra capital and not circulate the entire amount. It can be determine that this approach of the method is chiefly based on assertions and is prone to too many variable that are unlikely to be present in the real world of the capitalistic mode of economy. This could be termed as too imaginative in nature but the key factor of the entire book is to understand the approach so such loose points could well be overlooked.
However, tightening these loose strings would certainly do no harm in any sense and under any circumstances. Chapter 3: An Introduction to a History of Money This chapter mainly deals with the development and evolution of transactions and the advent of money into existence. The author narrates how transaction started with barter system and gradually came to the fundamentals of exchange systems with the assumed relative valuations of articles like nails, sugar, cattle, tobacco, iron, dried cod, shells, salt and similar objects only to be replaced by representative metals like copper or specially stated gold and silver.
Later concept value came in with the perception of money and economy started developing in a faster pace. The author L. Randall Wray narrates the entire development with clear and enjoyable approach and deals with complicated nature of the money concept in the later stages of the chapter. However, it can be stated that this chapter was not important and could have been discarded because it hardly states any different observation of approach or adds any specific information shown in a different light of perception. Chapter 4: Government Spending, Deficits and Money
Government Spending, Deficits and Money is the fourth chapter of L. Randall Wray’s book Understanding Modern Money: The Key to Full Employment and Price Stability. Here the author deals with features like government deficits and the accessories related to it like outweigh costs and time bound management system along with other important aspects like the increase of money supply with deficit and bank reserve increase. Here L. Randall Wray also deals with consumer durables, housing, investment and government borrowing techniques and policies.
This is a very important chapter of the book because it deals with the perception of interest rates, loan able funds and inflation along with private spending. This chapter could be enumerated as the central theme of the book and is written in a conventional approach rather than the usual differentiating approach taken by the author in general sense with the inclusion of cost-push inflation and aggregating supply mechanisms. This part is well written and definitively understandable by all along with being extremely edifying. Chapter 5: Monetary Policy: Interest Rate Targets and the Non-Discretionary Nature of Reserves
This chapter deals with the arguments in relation to monetary policy that is responsible for narrowing down the interest rates in a very small frame of time. Thus it could determined that this chapter mainly deals with the value of money and its purchasing power in relation to the overall broader perspective of fiscal atmosphere with the indication of determination of the total inflow of money and monetary transactions. To ascertain this purpose and to be successful in this approach the author of the book targets the fed funds and zooms in to enumerate and evaluate the whereabouts of phenomenon included in the financial market.
The author’s perspective of banking system is clarified in this section and he is very successful in letting his readers become aware of the transaction process and the internal mechanism of money with the parameters of a capitalistic form of market induced economy. This chapter of L. Randall Wray’s book pursues a subject that is otherwise difficult to conceive but the author is equipped well enough with words to fulfill the learning potentials of the readers very successfully. Chapter 6: Employment Policy and the Value of the Currency Employment Policy and the Value of the Currency is another very important chapter of this book by L.
Randall Wray as it deals with the most practical problems of today’s world. Though the main focal point of this chapter is based on the developments of the post second world war economy it could be safely stated that the variables and proceedings can be enumerated as one and unanimous for capitalistic economies all around the world. The author in this chapter deals with monetary policies, implementation of new Acts and the possible and actual consequences of these in the economic life of the population concerned along with possible sustainable solutions.
The basic problems dealing with employment is an important feature of any state and specific amount of importance and care is taken while evaluating and analyzing the policies. This chapter again is well written and extremely informative in nature. Chapter 7: The Logic of the Taxes-Drive-Money View L. Randall Wray states in the beginning of this chapter that “will create a simple, hypothetical ‘model’ to demonstrate the logical basis of claims previously made in this book. To call this a ‘model’ may be overly pretentious, and might scare some readers, so some assurance may be required.
” (Wray, 155, 1) Indeed L. Randall Wray uses a minimum of mathematical derivations and equations to narrate the Logic of the Taxes-Drive-Money and presents the readers with models that are based on statistical data available and enumerates the difficult measures of financial derivations. His model presents the most lucid measures to understand the nature of economy where the basic nature of variables includes no governments, market or money. His assumptions are clearly based on the population that is enumerated as completely self-sufficient in nature.
In the later stages the author introduces taxes, government and money in gradual manner to make things easier for the reader. Again in the later stages in the chapter the author introduces the aspects of private banking system, central bank, reserves, monetary operations, fiscal operations and also incorporates functions of government to land into the environment of a modern financial system. With the availability of monetary transactions and similar variables the milieu becomes a canvass where the practical mode of application can be ascertained.
Thus it becomes clear that the model presents the settings of a proper financial state with the ability of making the reader comfortable with the operations and could understand the proceedings with relative ease. This chapter presents the skills of the author as an imaginative write who can visualize the difficulties of the readers while approaching a complicated subject. The lucidity of this chapter is unparallel in nature and any individual with the minimum interest in the subject would be able to grip the proceedings incorporated by the author.
Chapter 8: Conclusion The eighth and the concluding chapter of L. Randall Wray’s Understanding Modern Money: The Key to Full Employment and Price Stability presents the sum total or the cumulative representation of the entire book. Here he narrates the arguments that he had put forward in the earlier sections and puts an added emphasis on the subject of zero unemployment or full employment and the possibility of the circumstances under which this feat would be achievable under certain variables and constants. L.
Randall Wray puts his emphasis on the subject of voluntary unemployment and suggests that this section of the population should also be taken into consideration to achieve the perfect result of formulation. L. Randall Wray takes in consideration the issues relating to NAIRU in the process of formulation of his subject so that no room is remained untenured under any circumstances. Under the same parameters L. Randall Wray ventures the wage curve and the labor market equilibrium to enable the better understanding of the procedures that was of such importance for the book.
He also ventures schemes and policies and makes conclusive analysis of the fiscal situations available. Thus it can be safely stated that L. Randall Wray’s Understanding Modern Money: The Key to Full Employment and Price Stability is a successful text that enables the students to approach the difficult subjects like financial parameters with relative ease. It should also be stated that this book provides the students and enthusiasts of financial studies with the joyful presentation of knowledge and learning.
This makes this book so unique in nature. L. Randall Wray appears to be a master of converting difficult fiscal formulations into lucid statements that immediately becomes acceptable to students and enthusiasts alike. Additionally it can be mentioned that the author used number of important references and resources to prove his statements making the book more informative and reliable. It is true that with the use of sources like John Adams, C. H. E. Philpin, Bowen, David H. Kopf, Blinder, Richard G.
Davis, Boulding, Stephanie Bell and using reports such as Monetary Policy Report: Summary from the Bank of Canada has mad e this book extremely educational. So to conclude the entire subject it can be safely sated that this book by L. Randall Wray can be regarded as one of the most enjoyable books on the subject with a eye for a different perspective on a given subject and with a mode of lucidity that could be termed as distinctively unparallel in nature.
Wray L. Randall; 1998; Understanding Modern Money: The Key to Full Employment and Price Stability; Edward Elgar; Northampton, MA.