The money scoreboard

This post is intended to be a hopefully brief synopsis of how the monetary system works using an Austrian framing with MMT terminology. If you don’t know what that means, you’ll see what I mean as I proceed.

MMTers like to say that money is like points and the government is just a scorekeeper. I have never really liked that analogy because the money unit of account is not just about keeping score it is also a government IOU. The government then owes its citizens something every time it issues an IOU. It is indebted to us in some capacity. So the money represents not just a ‘point’ but a debt too, even if that debt is only in fiat currency. This is the inherent problem with fiat currency for me; the promise the government makes to repay in something it can create in unlimited amounts makes that promise somewhat irrelevant.

Nevertheless, the scorekeeper/point analogy has some utility in terms of our institutional arrangements. So I am going to try to use it here.


The amount of money or credit in the system does not change the productive capacity of a society at one point in time. A country can produce whatever it can produce based on the available physical and human capital. As Andy Xie noted money contracts introduce a distribution problem, but they do not change the inherent productive capacity of a society.

So money is the way that we measure that productive capacity and set prices for wages, consumer goods and services and assets. In most monetary systems including in the euro zone, government has been tasked with setting the currency unit of account to make that measurement. If we were to simultaneously increase the price level of wages, consumer goods and services and assets by 1000-fold, all that we have done is change the nominal amounts, not the actual capacity to produce. The ‘points’, as MMTers would call them, are now worth one one thousandth in productive capacity of what they previously were.


The problem therefore is debt. See, debt introduces a money distribution problem because debt contracts are almost always agreed in nominal terms. If the government were to decree a 75 percent decrease in all prices for wages, goods and services and assets, all would be the same except the debt. The debt would be four times as onerous for debtors in real terms and four times as beneficial for creditors.

Our credit-based monetary system and its contracts signed in nominal money units of account create a need for price stability in relative terms as well as in absolute terms. For example, if the price of labour rises less rapidly for the average worker than the value (price) of output, as it has for the last three decades in the US, you have a distributional problem. Suddenly, people can’t afford stuff and the economy slumps unless it is creating more debt – (so-called Ponzi finance). That’s why all central banks are tasked with maintaining price stability.


Here’s where I get Austrian using MMT language. Recession is the way our economic system restores these points (the money unit of account) to real value. Often, the scorekeeper (government) creates so many points that the economy bumps into the whole distributional problem where prices for wages, goods and services and assets have gotten out of whack in relative and/or absolute terms. Businesses have overestimated how many points their customers have to buy stuff with and they ratchet back production, cut back staff and so on – classic business cycle stuff. The vast majority of the downturn comes from reducing inventories and output to recalibrate for how many points people actually have.

But, governments don’t like ‘recalibrations’. So they lower the price of the points to spur greater demand for them, promoting a greater distortion in the relative and absolute number of points available. Put simply, the scorekeeper has padded the score artificially, creating distortions due to the fact that debts are contracted in nominal terms.

Monetary Policy

Remember, however, that the government is just a scorekeeper here. They are not a player. They create the points, put them up on the scoreboard. And the scorekeepers can never run out of points. They can put up points in infinite quantities limited only by how fast they can bang out the keystrokes it takes to change the score.

Now, the government can change the score on the sly in two ways. First, it can change relative scores. That is to say, it can give some people more points and other people fewer points. It accomplishes this via monetary policy. Its monetary agent, the central bank, acts on its behalf and is never permitted to add points to the scoreboard. It is only allowed to reallocate points. For example, the central bank can take some points away from those who hold points as bonds and add some points to those who hold their points as reserves. These are point swaps. There is no net addition to the number of points on the scoreboard, ever.

Relative price levels change and winners and losers emerge because of this policy. More and more people owe more points than they can possibly hope to pay back. Eventually when the price of money falls to zero, the game of padding the score artificially is up.

Fiscal Policy

Unlike its agent, the central bank, the scorekeeper (government) can always add or subtract points (net financial assets) in the system if it so likes. This is called using fiscal policy. If you pay taxes, what you have is a net loss of points. Deficit spending, on the other hand is a net gain of points. That is to say, when the scorekeeper (government) taxes you, on net, it is draining points (net financial assets) off the scoreboard. Whenever the government spends, it is adding points to the private sector’s scoreboard (instantly creating a zero-day net financial asset).


During a recession, the scores – both on absolute and on a relative basis revert to their mean trend values. If the score has been padded a ton as it has in the past generation, you get debt deflation as more and more people become unable to pay off the points they owe. And this is the problem we now face. The government wants to keep adding to the score, but doing so always creates distributional problems because debts are contracted in nominal point (money) terms and because some people receive points (money) while others do not.

I will stop there. I think the scoreboard thing is an interesting way to look at it. It has its limitations but I hope running through the analogy was useful.

P.S. – Randall Wray argues the case for nominalism forcefully i.e. that all state money has been fiat money. For that view, see here.

  1. geerussell says

    I’ve seen that scorekeeper analogy used in other MMT discussions before and always hated it. It only speaks to one very narrow aspect of vertical money–that the issuer can’t run out of it. Taking points off the board isn’t an intuitive aspect of most sports but that function, taxation, is as essential to MMT’s description of the monetary system as the idea you can’t run out of points.

    Then, try to use the scorekeeper analogy to talk about horizontal money and you end up in a quagmire of awkward descriptions of players trading points for things, deflated/inflated touchdown values and general strangeness that defeats the entire purpose of using an analogy to provide some kind of intuitive clarity.

  2. @economicsnz says


    I like the points/scorekeeper metaphore because it stresses the idea of ‘unit’ of account. So, it introduces the idea of numerical measurement, so making the idea of ‘money of account’ quite general and independent of individual creator or institution.

    ‘Money of account’ also has a dimension that permits consistency in mathematical reasoning ie. in equations.

    Historically there have been any number of monies of account and technologies of record keeping. The technologies that dominate at the moment in the eeveloped world are electronic blips. The institutional arrangement that dominates at the moment is banking/government with extensive arrangements for local and international governance. These arrangements have failed.

    The political features we’re ‘stuck with’ are those of elites, oligopolies, representational democracy, dictatorship, world politics, etc. etc. Their ‘configuration’ is also far from ‘optimal’ being riddled with greed and corruption.

    Money/currency is said to be backed by tax but that begs so many questions about the other things I began to list that I feel it’s one cornerstone only.


  3. haris07 says


    Right on, MMT in and of itself is a useful description of how things work but is not a practical solution.

    I would however argue that you are placing too much difference between the scorekeeper (govt) and central banks as a distributor only. While in the very narrow sense this is true, often times the lines blur. Govt, when pushed into a corner, decides that it needs to put more scores on the board, with either an explicit (unlikely) or implicit (more likely) understanding that the central banks will monetize them as needed.

    The real key, as you already alluded to in your other post, is that the scorekeeper and central bank are very inefficient at putting up scores properly to benefit the society as a whole and create “value” i.e. those points that the scorekeeper is awarding is being misallocated and misspent.

    1. Edward Harrison says

      Right, as I said on the austerity post, the CB can facilitate the fiscal agent by monetising debt. That’s what I call quasi fiscal policy and it’s what the ECB is resisting.

    2. @economicsnz says

      MMT is part of a practical understanding I’d say. It would help put a ‘new deal’ in place. We’d get bangs for our bucks where ever in the world that takes place. But I’m not saying we should just spend. We also need to sort out the corruption and graft in the financial system. Hard work ahead!

  4. Dave Holden says

    Great post.

    But Re points – haven’t mosts of the points been created by private sector banks and isn’t most of the distributional (malinvestment) problem because of this?

    1. Edward Harrison says

      Dave, that is one of the flaws of analogies, isn’t it? I agree that the points are mostly created by private sector banks. However, I would also still argue that the distributional problem is largely a function of fiscal and monetary policy. The business cycle will always be with us but it is amplified and the distributional effects largely determined by government policy. That’s my view. Again, Austrian framing on MMT terminology.

      1. Dave Holden says

        Agreed, monetary, fiscal, regulatory failings are why we’re here. But I feel it important to distinguish where those failings manifested most severely because to some extent it’s been a political choice, in my opinion driven by vested interests, that has made this a government debt issue. I think in many countries there was a medium term growth/debt problem but it’s the policy responses that have led these to become short term and critical.

        1. Dave Holden says

          I’ll add – because it’s important that the guy on the street realises why his local hospital services are being cut while private sector bankers are still receiving large bonuses.

    2. haris07 says


      Very good point, the points are created by the private sector (as MMT points out, properly, banks do not lend reserves or any such mumbo jumbo, but rather make loans and then look for reserves). Taking this to the next step, also as you point out, these private sector points are the ones that create a majority of the malinvestment. I guess the next step is, using sectoral balances, and also since ultimately the government is the only entity that can spend the money into existence, how do these private points created by banks get onto the scoreboard that only the government can update? Is this because malinvestments do not product the proper taxable base by the govt and therefore leads the govt into more and more deficit spending to counter the effect of a recession when banks destroy these points? How do these private points get onto the scoreboard?

      Good point though!

      1. geerussell says

        Private points, or horizontal money, don’t change the net score. Private credit money creates an offsetting asset and liability on the balance sheet of both the lender and the borrower for a net change of zero.

        If the score was 30-30 between private non-bank and private bank, a loan of ten changes it to 40-40.

        Whether this represents malinvestment or not is a separate question. It’s just an operational description of the system.

        1. geerussell says

          To clarify there, the score is private financial assets vs private financial liabilities.

        2. Edward Harrison says

          Thanks for reminding us of that. I had forgotten that the points were net and that private sector credit was irrelevant. Cheers.

          1. Dave Holden says

            I may be wrong but my understanding is that Steve keen disagrees completely with this private sector nets to zero point.

          2. haris07 says

            I understand the point but I think I am still missing something….it is the over leveraged private sector debt that is causing the current set of problems (lets stick to the US for now).

            This same point (that there is an asset for each liability) argument has been refuted by Steve Keen and others and indeed if it didn’t matter, why would there be a problem at all? Classical economists have argued the same but as Minsky (and Keen and others) have proved, this doesn’t hold up.

            I am no economist…but something doesn’t seem to fit.

            As far as I can see, at the very point of creation of the private sector points, liabilities = assets. However, assets decline in value while liabilities remain. This is what causes the problem. So, ignoring liabilities just because they have a corresponding asset doesn’t seem to apply.

            Is horizontal money truly irrelevant?

  5. geerussell says

    “Is horizontal money truly irrelevant?”

    It’s not irrelevant but it’s important to understand the distinction between horizontal money (private private) and vertical money (public private).

    Horizontal money is players passing points back and forth to each other. We both have 10 points. I score a touchdown, you give me 7 for it. You score a field goal I give you 3. Now I have 14 and you have 6 but the net change of points in the system is zero.

    I make another touchdown but now you don’t have 7 points to give me so I go to the bank for a loan. That’s +7 for me (deposit), -7 to me (IOU to the bank), +7 to the bank (IOU from me), -7 to the bank (my deposit). Net change: zero.

    We can do that all day as players but the net change in points available in the system will be zero.

    Now a new player comes onto the field and starts making touchdowns, what happens? Either his touchdowns go unrewarded because there aren’t enough points to go around, the value of a touchdown deflates to less than 7 points or more is borrowed from the bank.

    As more players come onto the field (population growth) and/or the volume of touchdowns is increased (productivity/innovation) a shortage of points can become a crisis with a lot of players forced out of the game and a players carrying a debt load incurred at 7 point touchdowns and being repaid with 5 point touchdowns.

    This is all horizontal money, shuffling points from one player to another but always a net of zero in the overall system.

    The scorekeeper could step in and relieve or prevent this crisis by giving 7 points to everyone who scores a touchdown. Now the points in the system can expand to accommodate the level of activity on the field. This is vertical money.

    …and that’s an analogy tortured to death in order to bring it closer to describing reality.

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