TL;DR: I wanted to better understand the mechanics of a modern monetary system. View the reading or a simple monetary model.
I'm a full-time carer for my disabled mum. It seems an age since I was technical and training lead for a number of transnational accounting system projects; Enterprise Resource Planning (ERP) to use the lingo. During this time I opened a self-invested private pension (SIPP). I made regular contributions for a while. But that was then, my SIPP lay dormant, forgotten for years. Then one day I received an email. "Your SIPP has a high proportion held as cash" read the headline. It was my SIPP provider. They continued, "... This might be part of your strategy, but it can drag on returns." Strategy? I didn't know whether to laugh or cry. What strategy? I ignored it, a high proportion of not much is not much. But it gnawed at me. I should do something. Near-term, my choice was simple, so I thought, invest in a government bond fund. Thing is, it didn't feel simple. Nothing post 2008 financial system collapse felt simple. What was this system? I remember undergraduate economics, just, the certainty of lectures articulating the efficient markets hypothesis and the risk free asset. I knew nothing beyond a generally received narrative. I wanted to know more.
In the summer of 2018 I bought Crashed; a recently published analysis of the 2008 financial crisis written by Adam Tooze. Thanks to the recommendation algorithm I bought two further books soon after, these being, Making Money written by Christine Desan and Monetary Economics written by and Marc Lavoie (G&L). Desan reveals the evolution of the English monetary system through the ages. A simply stunning historical adventure. While metallism narrates the compound money of earlier times, it was a system - a monetary system - that bestowed on precious metals a cash price. Today, a government with the authority and power to create currency will issue bonds in order to drain reserve balances and produce collateral.
By late 2022 it dawned on me that the wonderful books and academic papers I have mostly read since 2018 were each a lens through which to view a particular social system - one of power, resources and the distribution thereof. Laterly, the exceptional work being done by the economists at the University of the West of England, Bristol has come into view. From this reading we learn institutions have evolved modern money into market-based finance. A pro-cyclical, collateralised, bond price sensitive system to completely absorb the theme of Tooze's tome.
My reading continued. Some of the academic texts allowed me to construct my own simple accounting treatments (old habits). Eventually, however, it was time to focus on G&L's imperious book. Specifically, I wanted to understand the early chapters, G&L's incrementally sophisticated sectoral accounting explanations of a government money system. I set out to build my own computational (agent-based) model interpretations of the G&L described systems. At the very least, I'll improve my historical knowledge, keep my tools sharp and have fun doing so.
View an architectural sketch .
Agent-based models are written in the Python computer programming language. JupyterLab notebooks interact with Google BigQuery in order to wrangle and analyse both model output and real-world financial system data. Streamlit and Datapane python frameworks display test and analysis output.
Start with the reading list or go straight to the simplest monetary model.
Dan O'Driscoll.
Email: info@modernmoney.studio.
Previous employment: Japanese sogo-shosha, a professional service and major energy transmission company. Further education: Undergraduate degree in Business & Economics (BA): Postgraduate degree in Computer Security Forensics & Risk Management (MSc). Based near London, England.