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The Macroeconomy and the Monetary Circuit

In: Ecological Money and Finance

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  • Thomas Lagoarde-Segot

    (KEDGE Business School and SDSN France)

Abstract

The Central Bank has a balance sheet. The State also has one, as do banks, companies, households, and companies, households, and each of us. Moreover, these balance sheets are all interconnected: every payment is a receipt, and every debt is a claim. The most realistic representation of the economy is perhaps not that of a market, but rather that of a dynamic network of interconnected balance sheets, influenced by accounting conventions, and in which money serves as a unit of account. This chapter begins with a few basic observations about the creation, circulation and destruction of money in the capitalist economy. This serves as a foundation to identify and discuss the key paradoxes of macroeconomic analysis, including the thrift paradox, the debt paradox, the cost paradox, and the public deficit paradox. We then build on this analysis to describe the detailed monetary mechanisms and macroeconomic implications of government net spending, and we derive the conditions for public debt stability. Finally, we discuss the links between the monetary production economy and sustainability.

Suggested Citation

  • Thomas Lagoarde-Segot, 2023. "The Macroeconomy and the Monetary Circuit," Springer Books, in: Thomas Lagoarde-Segot (ed.), Ecological Money and Finance, chapter 0, pages 163-200, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-14232-1_6
    DOI: 10.1007/978-3-031-14232-1_6
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