"Government, possessing the power to create and issue credit and currency as money, and enjoying the right to withdraw both currency and credit by taxation and otherwise, need not and should not borrow capital at interest as the means of financing governmental work and public enterprise." -Abraham Lincoln
Functional Finance is a campaign to raise awareness and promote a more balanced approach to managing the economy and money.
Functional Finance represents a descriptive framework for understanding the economy particularly how money creation and destruction accounts for fluctuations in economic activity. We believe democratic institutions, with the means to support the twin economic goals of full employment and price stability, need to understand their role and form laws with an understanding for how money works and their responsibility in managing economic outcomes.
The Great Recession brought on by a financial sector crisis has taught us that our political leaders have mostly lost sight of or failed to appreciate their role in supporting full employment and low inflation in the economy. The predominant narrative instead requires unelected, privately owned central banks to pursue limited and risky activity in an attempt to support lending. This hasn't and won't work because the tools banks have are far more limited than those available to governments. Only by working in coordination and in recognition of their twin roles in managing money creation will we achieve a stable, sustainable economy with full employment and price stability.
Economist Abba Lerner first articulated the principles that guide Functional Finance in his 1943 book of the same name writing:
"The central idea is that government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money and withdrawal of money, shall be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine of what is sound and what is unsound.....Government should adjust its rates of expenditure and taxation such that total spending is neither more or less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is deficit, greater borrowing, "printing money," etc., then these things in themselves are neither good or bad, they are simply the means to the desired ends of full employment and price stability."
Functional Finance advocates for a new, democratic approach to managing economies specifically sustainable innovation, full employment and inflation.
How We Aim To Do It
1. Raising awareness and promoting public policy in support of the triple mandate of sustainable innovation, full employment and price stability to improve economic outcomes 2. Direct advocacy to raise the profile of practitioners at the forefront of our core issues 3. Working with like minded organizations to support the movement for new economic thinking 4. Develop public policy, based on the principles of functional finance, to provide solutions to societal problems
Join us to better understand how we can change the world by changing how we think about money!