 Bismillahirrahmanirrahim. Learning lessons from history requires tripping away the specifics and the particular and creating an abstract model which preserves some of the structure across time. There are many modeling strategies in use. The goal of this lecture is to show that the mainstream methodology which is based on a nominal strategy is wrong and an alternative is available which we hope to demonstrate. If we study many over the course of the 20th century we find many radical changes in the monetary system from gold standard to dollar standard to abandonment of gold linkage of the dollar from fixed exchange rates to floating exchange rates. These changes cannot be explained by conventional economic methodology which seeks to provide a universal law which works the same across time. Also the reasons for this change are hidden and cannot be captured by the types of nominal models in use in mainstream economics. The difference between nominal models and real models is very simple. Nominal models attempt to match the appearances, the observed reality without having any concern about matching the hidden portions of reality. In contrast real models attempt to discover the underlying hidden structures of reality which cause the appearances that we see. The methodology of modern economics is based on ideas of Friedman that a model does not need to capture the hidden mechanisms. It only needs to match what we observe. Friedman invented this methodology because surveys of firm managers showed that they did not plan to maximize profits. So Friedman argued that what the managers intended to do the hidden motivations did not matter. All that mattered was that the profit maximization model produced a match to the observable actions of the firm. In contrast realist models look at what firms real world firms actually do instead of just looking at the data produced by firms and trying to find a model which fits the data without concern for the actual behavior of firms. So studying the actual behavior leads to radically different models from those currently found in mainstream economic textbooks. Apart from realism we plan to use a newly developed strategy called agent-based modeling to develop our monetary models. These models allow for a wide number of different kinds of agents like consumers, laborers, producers and the government and allows each of them to have their own behaviors. This is called heterogeneity. ABM become feasible because of massive increases in computational power and lack of this power in early part of the 20th century when modern economics was being developed led for the creation of extremely simple models only because it was only the simple models that it was possible to calculate outcomes for by hand. These oversimplified models currently in use all over the world for macroeconomic policy decisions have only one agent because putting in multiple agents leads to computational difficulties beyond those which could be solved by pencil and paper on hand and when the congressional committee investigated the failure of economics to predict the financial crisis one of the witnesses Robert Solo said that this was because the DSGE models in use have only one agent and one agent cannot deceive himself and deception and fraud was a major element which led to the global financial crisis. In his attempt to explain the Great Depression of 1929 and why this was not predicted by classical theories of economics at the time Keynes came up with three radical insights. None of these insights was accepted by the neoclassical economists because it simply does not fit into the types of models that they use to study economics. All three of these insights can easily be incorporated into models based on the ABM modeling strategy. One of these insights is complexity where complexity is used at technical term not in its normal English language meaning and the meaning of complexity is that a system displays complexity if the behavior of the whole is different from the sum of the parts. Studying individual parts of the system will not lead to an understanding of how the whole system behaves. Keynes gave an example that the negotiations between laborers and firms takes place in the form over nominal wages but what they really want to do is to negotiate real wages but real wages are not under control of the system not in control of the agents and so they cannot decide what happens to the real wage by looking at the nominal wage. Another critical insight of Keynes was radical uncertainty given that the system is complex and what happens depends on the decisions of large number of agents. Nobody can predict what will happen. This is again in conflict with the standard economic methodologies which assumes that expectations are rational that weak people can more or less forecast what is going to happen. These issues heterogeneity complexity uncertainty play a central role in the theory of money. In conventional textbook models there is complete knowledge the value of money does not fluctuate so in that situation money just becomes an accounting unit. You can just write down in the books who owes how much to what and then money basically disappears from the system but if different people have different evaluations of what the value of money will be and if the creditors are trying to have a dear money have a strong and stable money while the debtor are trying to reduce the value of money and so they act differently and if there's uncertainty about the value of money itself we don't know if the money value is going to decline or go up. All of these give a very essential and important role to money which is different from that of any other commodity in the economic system. It no longer plays the role of simple accounting unit. So to understand money we have to take into account these factors and it is impossible to do so in conventional models of textbook economic theory. The philosophy of knowledge known as logical positivism emerged in the early 20th century and economic theory was reshaped to match this philosophy and was built on the foundations of logical positivism. This theory was later rejected by philosophers. This theory leads to nominalist models but it was realized that nominalism is not enough to explain how and why science works. So modern economics is based on a fundamentally flawed philosophy. In this our approach historical approach to monetary theory we will abandon this positivist approach and use realist models to study money and this will give us far deeper insights into the nature of money which are not available in conventional approaches.