Monetary Macro Accounting Theory

TL;DR

This paper introduces a comprehensive monetary macro accounting theory (MoMaT) that models money primarily as a medium of payment for obligations, emphasizing debt relations and legal principles, with applications in blockchain and macroeconomic analysis.

Contribution

It develops a novel monetary accounting framework focusing on debt vortices and legal principles, integrating multi-level systems and potential blockchain implementation.

Findings

MoMaT models debt creation and resolution as central to monetary systems.

The framework links legal instruments like Bills of Exchange to monetary issuance.

Potential for blockchain and AI integration in monetary policy and finance.

Abstract

We develop a monetary macro accounting theory (MoMaT) and its software specification for a consistent national accounting. In our money theory money functions primarily as a medium of payment for obligations and debts, not as a medium of exchange, originating from the temporal misalignment where producers pay suppliers before receiving revenue. MoMaT applies the legal principles of Separation and Abstraction to model debt, contracts, property rights, and money to understand their nature. Monetary systems according to our approach operate at three interconnected levels: micro (division of labor), meso (banking for risk-sharing), and macro (GDP sharing, money issuance). Critical to money theory are macro debt relations, hence the model focuses not on the circulation of money but on debt vortices: the ongoing creation and resolution of financial obligations. The Bill of Exchange (BoE) acts as a unifying contractual instrument, linking debt processes and monetary issuance across fiat and gold-based systems. A multi-level BoE framework enables liquidity exchange, investments, and endorsements, designed for potential implementation in blockchain smart contracts and AI automation to improve borrowing transparency. Mathematical rigor can be ensured through category theory and sheaf theory for invariances between economic levels and homology theory for monetary policy foundations. Open Games can structure macroeconomic analysis with multi-agent models, making MoMaT applicable to blockchain economic theory, monetary policy, and supply chain finance.