The Modern US Monetary System

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On Modern Monetary Realism

By Rick Kahler MS CFP® ChFC CCIM

In a previous ME-P column I explained why any currency-issuing country, like the US, will never default on its obligations or run out of money with which to purchase goods and services priced in its own currency. Sovereign nations that are currency issuers have no solvency constraints, unlike currency users such as individuals, corporations, and government entities that don’t issue currency.

Why the Government is Not-Like Medical Professionals

On Modern Monetary Realism

To follow up, let’s look at what has become known as Modern Monetary Realism (MMR).  Economist Cullen O. Roche describes it in a 2011 article on his Pragmatic Capitalism website titled “Understanding the Monetary System.”

This theory came into existence in 1971 when President Nixon eliminated the gold standard and allowed the government to print money at will. This was a paradigm shift in our monetary policy that’s gone largely unnoticed for decades by many educators, economists, and politicians.

Guiding MMR Principles

The principles of MMR are:

  • The Federal Reserve works in partnership with the US Treasury to issue currency. All other units of government, private entities, and individuals are users of the currency.
  • The government creates money by minting coins, printing cash, and issuing reserves. The private banking sector creates money by creating loans and bank deposits.
  • The Federal Government cannot “go broke.” It is inaccurate to compare it to households, companies, and local governments, which all are users of money and can go bankrupt.
  • The major constraint on currency issuers (sovereign governments like the US) is inflation. It behooves governments to manage the money supply prudently in order to avoid impoverishing their citizens through devaluing the currency.
  • Floating exchange rates between countries are a necessity to help maintain equilibrium and flexibility in the global economy. Nations that unduly inflate their currency suffer the consequences of devalued currency, shrinking purchasing power, and contracting lifestyles.
  • The debt of a sovereign currency issuer is default-free. The issuer can always meet debt obligations in the currency which it issues.

Cullen O. Roche Speaks

Roche suggests that a functional government supports the country’s financial system in four ways:

  1. The US government was created by the people, for the people. “It exists to further the prosperity of the private sector—not to benefit at its expense.” Roche argues that when government becomes corrupt by obtaining too much power or issuing too much currency that results in high inflation, it then becomes susceptible to a revolt and dissolution.
  2. Government’s role is to be actively involved in regulating and helping to build an infrastructure within which the private sector can generate economic growth. Roche views regulation as not only beneficial, but necessary to temper the inevitable irrationality that can disrupt markets. Still, he emphasizes that it is the private sector, not the public sector, which drives innovation, productivity, and economic growth.
  3. Money, while a creation of law, must be accepted by the private sector while prudently regulated by the federal government, keeping in mind that the purpose of the regulation is to maximize private sector prosperity.
  4. “Because the Federal government is not a business or a household it should not manage its balance sheet for its own benefit,” notes Roche, “but in a way that most benefits the private sector and encourages private sector prosperity, productivity, innovation and growth.”


Like me, you may need to re-read this a couple of times to begin to grasp the concepts. Once you throw off the outdated pre-1971 model of the monetary system, understanding the basics of MMR isn’t difficult. Knowing the basics of how our monetary system works will help physicians, and all of us, frame the important issues in the turmoil unfolding in Europe and in our own upcoming elections. 


Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact:


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Essay on Capitalism Weeding

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What it Is – How it Works?

By Rick Kahler MS CFP® ChFC CCIM

Rick Kahler CFPWhat is capitalism? How does it work? For some time now I’ve been meaning to write a column on that topic, but it has seemed to be a daunting task more fit for an economist than a financial planner.

Then I remembered this story from my childhood. But, it is an allegory for doctors, too!

The Story

One summer, we were visiting my grandparents. I was about ten and my brother was seven. Our grandfather hired us to weed his garden, paying us a dime apiece.

That seems like a paltry sum, but it wasn’t such a bad wage for a couple of kids at the time. After all, a bottle of soda only cost a nickel.

We started off to work. The day was hot. The garden seemed huge. I kept thinking about getting a bottle of soda and sitting in the shade. Pulling all those weeds seemed like a huge price to pay for that reward.

Then I had a brilliant idea. “Dave,” I said, “How would you like to earn an extra nickel?”

My brother was interested. I offered him the opportunity to weed my half of the garden for half of my dime. It seemed like a good idea to him, and we made a deal.

David weeded the entire garden. I bought a bottle of Coke with my nickel, sat in the shade, and watched him work. When the weeding was finished, he was tired and hot but had fifteen cents to show for his labors. I was broke, but I had enjoyed relaxing with my soda instead of having to work in the hot sun.

It seemed like a win-win situation to me. My grandfather didn’t see it the same way. In his view, I had taken advantage of my innocent younger brother by coercing or manipulating him into doing my work for me. I’m not sure Granddad ever forgave me for what I did that day.

A Willing Seller and a Willing Buyer

I suppose there may have been a tiny grain of truth in his perspective. After all, I was three years older than my brother. However, I don’t remember any bullying or manipulation being involved. I simply offered him a deal, and he took it. The transaction involved One thing of value—his work—was exchanged for another thing of value—my nickel. He benefitted from receiving more money, and I benefitted from not having to perform manual labor.

Thinking about it all these years later, it occurred to me that what I did was exactly the same thing my grandfather did. Each of us paid someone else to do a task we didn’t want to do. And each of us got the job done at the lowest cost to ourselves.

For Granddad to accuse me of using my position as the oldest to take advantage of my brother wasn’t quite fair. After all, one could say he used his position as a grandfather to get cheap labor out of a couple of little kids. I suppose one of his aims was to teach us about the value of hard work and the satisfaction of being paid for our efforts. The lesson I learned wasn’t exactly the one he had intended to teach.



The whole process, though, was a small example of capitalism at work. It was a lesson I took to heart.


My brother must have done the same. He’s still a hard worker, and he’s certainly been a very successful capitalist. And when his son was a teenager and I hired him to do my yard work, I had to pay him a lot more than a nickel.


How does this story relate to ACOs, pre-paid healthcare, managed care, the PP-ACA, MC/MD or the direct pay model of medicine? If, at all?

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.


Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact:

PODCAST: What is Financial “Green Washing”?


By Staff Reporters



According to Wikipedia: Greenwashing (a compound word modeled on “whitewash“), also called “green sheen“, is a form of marketing spin in which green PR and green marketing are deceptively used to persuade the public that an organization’s products, aims and policies are environmentally friendly.

Critics of the practice suggest the rise of greenwashing, paired with ineffective regulation, contributes to consumer scepticism of all green claims, and diminishes the power of the consumer to drive companies toward greener manufacturing processes and business operations. Many corporations use greenwashing to improve public perception of their brands. Complex corporate structures can further obscure the big picture.

Without external monitoring and verification, greenwashing strategies amount to corporate posturing and deception. When a company decides to behave responsibly and adopts a sustainable development vision, it may have to change its corporate culture deeply, in order to understand and appropriate the concept. It is not enough to integrate sustainable development into communication to persuade the consumer to buy.

While greenwashing is not new, it has increased in recent years to meet consumer demand for environmentally-friendly goods and services. This problem is compounded by lax enforcement by regulatory agencies such as the Federal Trade Commission in the United States, the Competition Bureau in Canada, and the Committee of Advertising Practice and the Broadcast Committee of Advertising Practice in the United Kingdom. New regulations and laws mean to discourage companies from using greenwashing to deceive consumers.










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