Mordan Monetary Authority

The Mordan Monetary authority (MMA) will have the following functions.

1 Funding the federal, state and local governments with debt-free money. For this purpose these governments will receive periodically (such as each quarter or each month) a sum of money on their bank accounts. In return the MMA will receive all tax [1] revenues collected from the public.

2 Managing the nation’s foreign currency reserves. When citizens are involved in foreign trade it will be inevitable that people will turn to the MMA to exchange their foreign currency for domestic currency.

In first instance traders who receive foreign currency for their exports will seek to sell this to other traders. However, the could be a mismatch between the supply and demand of foreign currency, either in quality or quantity. The former means that exporters have currency A, but importers demand currency B. The latter means that the supply of a certain currency A is greater than the demand for it.

In both cases holders of foreign currency have no other option than to turn to the MMA to exchange it for domestic currency. In this way the MMA will build up a foreign currency reserve, which it has to manage.

However, the MMA is not supposed to pursue a particular exchange rate.

3 Though function 1 does give the MMA a tool to control the money supply, it is desirable to give the MMA additional tools to control the money supply.

By selling “government bonds” – more accurately called “MMA bonds” – the MMA will extract money from the economy and hence decreasing the money supply. This could be done to prevent inflation.ย If the MMA wants to expand the money supply, it could buy the bonds it has previously sold.

These government bonds are not used to fund government spending, but serve solely as a tool to regulate the money supply.

4 Alternatively the MMA could expand the money supply by buying bonds from the Mordan Federal Credit bank (MFK). The MFK will subsequently use this money to provide liquidity to the private sector.

Below we have summarized the above in a diagram:

MMA

Supervision of the financial sector is not a function of the Mordan Monetary Authority. Instead this function is the responsibility of the Authority for the Financial Markets.

[1] We use “tax” as a generalized term for all public revenue, including revenues from the lease of public land and radio frequencies.

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9 thoughts on “Mordan Monetary Authority”

  1. The genius of this is in its simplicity. I know the concepts are not new, but modern governments (and both private and public financial systems) have complicated that which should never have been complicated to such a point that this basic (healthy) recipe is no longer recognisable.

    1. Obfuscation has been a deliberate strategy of the financial sector to gain influence, but it also is one of the causes of the financial crisis.

      The purpose of the model we advance, is to put the money supply under proper public supervision.

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