tag:blogger.com,1999:blog-2761684730989137546.post7162863615323446790..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: Stephanie Kelton on why the US doesn't borrow to spendmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-2761684730989137546.post-33438931658844595882012-05-31T16:07:30.616-04:002012-05-31T16:07:30.616-04:00"fees feed into bank earnings. The bank can o..."fees feed into bank earnings. The bank can opt to retain some or all of those earnings on the asset side of its balance sheet where they will improve its capital position. Or they can distribute those earnings (bonuses for all, hooray!)."<br /><br />The $10 deposit is a bank liability. Paying that $10 to the bank simply eliminates the liability. How does the bank retain a zero?ynoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-52739403100969027872012-05-31T15:29:14.926-04:002012-05-31T15:29:14.926-04:00" Hence he has changed discourse and talks ab..." Hence he has changed discourse and talks about 'worrisome deficits',"<br /><br />Good point, that may be a mis-direction play... he's impotent so he deflects attention onto the "deficit" and the moron legislators buy it...<br /><br />Takes the heat off of him and monetary policy...<br /><br />Resp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-40717312646456693212012-05-31T14:47:59.126-04:002012-05-31T14:47:59.126-04:00Matt, QE/Twist type operations where around the mi...Matt, QE/Twist type operations where around the middle of the list. He has been working down the list.<br /><br />True helicopter drops became later, he hasn't implemented any. But I think he now is concerned about 'credibility' and the political situation ('end the FED'/'change the FED' by both conservatives and progressives). Hence he has changed discourse and talks about 'worrisome deficits', I also think he may be worried about trade deficits, but does not know how to solve it.<br /><br />Helicopter drops were some things like buying equities/debt directly from the market. Buying muni bonds from local governments, implementing fiscal stimulus plans and financing them through the FED, etc.<br /><br />Apparently there were no 'operational impediments' then hehe. MMR guys are completely missing the point: all this operational nuances will fade compared to gold-buggery or progressives assaulting the FED; or will fade against a collapsing demand and deflationary economy; or will fade compare to blowing up the gold-standard, just like has happened in the past etc.<br /><br />THESE are the real sort of constraints about operations of basically the government printing money and financing itself (something most market participants seem to get directly or indirectly). Not the functioning of daily operations, where you can look for loopholes or bypass them if necessary.<br /><br />But 'technicians' usually obsess over technicalities, and miss the picture. Happens in every field.Leveragenoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-56069092530582441322012-05-31T14:12:05.255-04:002012-05-31T14:12:05.255-04:00Ramanan: Keep confusing the principal and agent!
...Ramanan: Keep confusing the principal and agent!<br /><br />The crux of the issue. While theoretically the cb is the agent of the govt, the reality that the financial sector wants to see is the cb as principal and govt as agent. The centuries-old struggle of finance capital to dominate.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-64467600630048530592012-05-31T14:08:52.693-04:002012-05-31T14:08:52.693-04:00Lev,
I think in 2002 Bernanke would have thought ...Lev,<br /><br />I think in 2002 Bernanke would have thought QE1, QE2, and Twist would have qualified as "helicopter drops".<br /><br />They have done nothing.<br /><br />He is scared, you can see it in his face when he appears. He's got nothing.<br /><br />For "deflation", now, I think something has to happen with petroleum prices, ie petro has to fall then prices in general will start to fall (housing, food, etc..).<br /><br />Bernanke will then shit in his pants...<br /><br />THE LAST THING HE WILL DO ABOUT IT IS RAISE INTEREST RATES. I dont see him raising rates. TPTB will have to get rid of him if they want higher rates at this point...<br /><br />IF HE WOULD RAISE RATES IN THE FACE OF CURRENT OUTPUT GAP AND UE, IT WOULD BE ADMITTING MONETARISM IS A COMPLETE FANTASY.<br /><br />I dont see Bernanke doing this under current economic conditions for ANY reason.... He's trapped by his academic frame of reference (monetarism)...<br /><br />Resp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-89217342725918713892012-05-31T13:38:37.886-04:002012-05-31T13:38:37.886-04:00If you have a $10 deposit in a bank, and then pay ...<i>If you have a $10 deposit in a bank, and then pay the $10 to that bank in fees, the bank doesn't store that $10 as "funds" for future deposit creation, does it?</i><br /><br />If I understand it correctly, fees feed into bank earnings. The bank can opt to retain some or all of those earnings on the asset side of its balance sheet where they will improve its capital position. Or they can distribute those earnings (bonuses for all, hooray!).geerussellhttps://www.blogger.com/profile/10631984593634015839noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-3553614909639499902012-05-31T12:52:25.993-04:002012-05-31T12:52:25.993-04:00Paul,
"The President of the United States as...Paul,<br /><br />"The President of the United States as well as most other so-called world leaders and their advisors "<br /><br />They are mostly lawyers and MBA types....<br /><br />Resp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-56429916737072634482012-05-31T11:50:12.200-04:002012-05-31T11:50:12.200-04:00"According to the Second Law of Thermodynamic..."According to the Second Law of Thermodynamics, na?"<br /><br />Partly. More a general observation that you don't understand systems, even simple ones, and thus have no idea how to apply the underlying math principles.<br /><br />From that perspective you're in over your head.<br /><br />You're a bulldog when it comes to reading and storing information. It's amazing and impressive how much stuff you have stored in that brain of yours. Way more than I.<br /><br />It's going to waste.<br /><br />Not an indictment as The President of the United States as well as most other so-called world leaders and their advisors are in over their heads too.<br /><br />In their case though there may be evil involved.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-85298438904823529122012-05-31T11:37:46.110-04:002012-05-31T11:37:46.110-04:00Yeah. Right.
According to the Second Law of Ther...Yeah. Right. <br /><br />According to the Second Law of Thermodynamics, na?Ramananhttp://www.concertedaction.com/noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-17579911710359811342012-05-31T11:07:32.077-04:002012-05-31T11:07:32.077-04:00"Keep confusing the principal and agent!"..."Keep confusing the principal and agent!"<br /><br />Alas, you are the one who is confused.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-54193614416239435022012-05-31T10:59:31.356-04:002012-05-31T10:59:31.356-04:00Keep confusing the principal and agent!Keep confusing the principal and agent!Ramananhttp://www.concertedaction.com/noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-54301888708101266192012-05-31T10:40:31.530-04:002012-05-31T10:40:31.530-04:00Someone should post the famous list of "what ...Someone should post the famous list of "what the FED could do in case of deflation" by Bernanke in 2002 (I think?).<br /><br />There seems 'operations' really don't matter in that case, when you have to save the system, the list was monstrous and helicopter drops and fiscal operations ('monetary financing' as ECB hawks would say) were in the list. <br /><br />Operations change to fit the environment, period. There is nothing sacred about them.Leveragenoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-14671081831569887612012-05-31T09:21:14.367-04:002012-05-31T09:21:14.367-04:00Bernanke: Then there are other liabilities includi...Bernanke: Then there are other liabilities including Treasury accounts and a variety of other things that the Fed does – we act as the fiscal agent of the Treasury. But the two main items, you can see, are the notes in circulation and the reserves held by the banks.”<br /><br />Ramanan said:The central bank is not the fiscal arm of the government. <br /><br />It turns out it is!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-32639328308328984682012-05-31T09:10:26.412-04:002012-05-31T09:10:26.412-04:00"It seems you are arguing sometimes for the p..."It seems you are arguing sometimes for the purpose of arguing."<br /><br />Nice to see others are beginning to figure that out.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76313854473401241842012-05-31T09:08:54.221-04:002012-05-31T09:08:54.221-04:00This comment has been removed by the author.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-32704947061833877452012-05-31T09:07:21.889-04:002012-05-31T09:07:21.889-04:00I am sorry, Bernanke said "we act as governme...I am sorry, Bernanke said "we act as government's fiscal agent"<br /><br />I am sure It must matter to you Ramanan. Bernanke is not saying that Fed is acting as my fiscal agent, not yours either. Obviously there must be difference there.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-49573632166494869912012-05-31T09:01:22.029-04:002012-05-31T09:01:22.029-04:00Ramanan said: "The central bank is not the fi...Ramanan said: "The central bank is not the fiscal arm of the government." <br /><br />Bernanke says Fed is government's fiscal agent(starts at 19:00).<br />http://www.federalreserve.gov/newsevents/lectures/the-aftermath-of-the-crisis.htm<br /><br />It seems you are arguing sometimes for the purpose of arguing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-6594537830967231062012-05-31T04:34:54.785-04:002012-05-31T04:34:54.785-04:00If you have a $10 deposit in a bank, and then pay ...If you have a $10 deposit in a bank, and then pay the $10 to that bank in fees, the bank doesn't store that $10 as "funds" for future deposit creation, does it?ynoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-62666009238241611182012-05-30T22:05:30.010-04:002012-05-30T22:05:30.010-04:00I thought this debate was settled long ago. Govern...I thought this debate was settled long ago. Government liabilities[GL] (cash or other) are what circulate as money. GL are created when Gov. spends and when any liabilities are returned to their originator, the liability no longer exists. A new liability must be issued. If reserves get added when Gov. spends and reserves disappear when taxes are paid. how can it be any other waymiller Bhttps://www.blogger.com/profile/02762669539585818441noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-20732800485904502512012-05-30T21:38:31.226-04:002012-05-30T21:38:31.226-04:00This Ramananistic discussion got me curious about ...This Ramananistic discussion got me curious about actual US Government procedures on handling cash. It is kind of complicated as there is a large bureaucracy of people with tiny slivers of responsibility for each part of the minutia.<br /><br /><br /><a href="http://www.irs.gov/irm/part3/irm_03-008-047.html#d0e438" rel="nofollow">This describes an overview of how cash is handled at the IRS</a><br /><br /><a href="http://www.law.cornell.edu/uscode/text/31/3302" rel="nofollow">This is the US Code Relevant</a><br /><br /><br />Who collects the cash and how much is collected determines how the cash is handled.<br /><br />The cash generally gets deposited in a “lock box” (a private banking institution) that provides treasury services, such as JP Morgan or <a href="http://www.usbank.com/cgi_w/cfm/commercial_business/products_and_services/treasury_mgmt/cashcoll.cfm" rel="nofollow">US Bank</a> or any number of other banks. <a href="http://www.irs.gov/irm/part3/irm_03-000-230.html#d0e369" rel="nofollow">See this</a> <br /><br />In other instances cash will be converted to a Money Order at a private bank by an IRS agent, and then the agent mails the bank draft with their payment report to a processing center.<br /><br />If the cash money is sent to an “ IRS campus” – gov. speak for a big processing center, the cash after being accounted for gets exchanged for a money order at the IRS employee credit union on the campus, if there is one. Otherwise it goes to a regular private bank as above for conversion to a money order. <a href="http://www.irs.gov/irm/part3/irm_03-008-045r-cont03.html#d0e12374" rel="nofollow">See this</a> <br /><br />For MMT amusement, this bit is particularly odd: <br />5.1.2.6.1 (01-24-2012)<br />Large Dollar Remittances<br /><br /> A large-dollar remittance requires special handling to ensure the earliest deposit to the Treasury so the government will enjoy the maximum availability of funds and earn interest at the earliest opportunityRyan Harrishttps://www.blogger.com/profile/04815033054435303399noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-70526666879841687782012-05-30T19:04:23.008-04:002012-05-30T19:04:23.008-04:00"Damn one of my comments has disappeared.&quo..."Damn one of my comments has disappeared."<br /><br />Sorry. I've been remiss in checking the spam filter. I just fished out a number of them that have gone missing recently.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-58829868441115087262012-05-30T18:47:41.380-04:002012-05-30T18:47:41.380-04:00"Under the alternative arrangement."
Un..."Under the alternative arrangement."<br /><br />Under current arrangements bond selling and buying by the government serves to maintain interest rates and manage inflation. <br /><br />Given that there is necessarily always a buyer for Treasury bonds under current arrangements - at some price - bonds are not "funding" instruments but interest rate and inflation management instruments.<br /><br />As I argued above, if someone hands me MY own IOU, that IOU ceases to exist as such (when it is in my possession). <br /><br />My IOU is only an IOU when it is held by someone else. When I hold it, it is nothing. I don't have to hold my own IOU as a "fund" for future expenditure. <br /><br />When my IOUs are handed back to me, they are "extinguished". When I give someone else my IOUs they are "created". <br /><br />I can't owe myself my own promise to pay myself with my own promise to pay myself... etc. <br /><br />As such, money essentially ceases to exist when it is placed in the Treasury's account. It comes into being when it leaves the Treasury's account. <br /> <br />Agreed, Bank deposits are bank liabilities and not govt liabilities (though perhaps this isn't so clear cut when deposits are guaranteed by the government?).ynoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-80220289530896462962012-05-30T18:28:48.319-04:002012-05-30T18:28:48.319-04:00Damn one of my comments has disappeared.
y,
&qu...Damn one of my comments has disappeared. <br /><br />y,<br /><br />"I think the point she was making is that, under current institutional arrangements, the whole business of government selling and buying of bonds is simply an interest rate maintenance operation."<br /><br />Under the alternative arrangement.<br /><br />Under the current setup, the "purpose" of issuing bonds is to get funds so that the government expenditure can be higher than taxes. <br /><br />As long as the Treasury lives with a no overdraft facility at the Federal Reserve, it has no choice but to issue bonds. <br /><br />"The Treasury does not store "funds" which are then spent at a later date (although this is how it tends to be conceptualized). "<br /><br />Yes the Treasury stores funds in TGA and TTL and lends some out for short term. Why do you think the accounts exists?<br /><br />"When the Treasury receives money (its own IOUs), this money is "deleted" (i.e. Treasury liabilities are "extinguished"). "<br /><br />When the Treasury receives funds, its balance at TGA/TTL increases.<br /><br />"When the Treasury spends, money is "created" - given that "money" is ultimately a Treasury IOU or Treasury liability) - see my comment above."<br /><br />When the Treasury makes an expenditure, the assets of the other sectors increases. Money - if it is deposits is not the government's liability. It is a bank's liability. <br /><br />"It's not about placing "funds" in the Treasury's account which can then be spent."<br /><br />It is about it. <br /><br />"When the Treasury issues bonds, it's not desperately worrying about whether anyone will buy them. They will be bought. "<br /><br />Yes it isn't because the markets love Treasuries. But while I do not worry about an imminent auction failure, telling thee worrier "the treasury simply credits bank accounts" is not a sufficient explanation.Ramananhttp://www.concertedaction.com/noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-25897355662241665822012-05-30T18:20:58.910-04:002012-05-30T18:20:58.910-04:00"The overkill is counterproductive."
I&..."The overkill is counterproductive."<br /><br />I'm sorry, are you a political consultant, or some sort of PR person? How do you define overkill? How do you define counterproductive?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-69153373416305046932012-05-30T17:36:12.071-04:002012-05-30T17:36:12.071-04:00I think the point she was making is that, under cu...I think the point she was making is that, under current institutional arrangements, the whole business of government selling and buying of bonds is simply an interest rate maintenance operation. <br /><br />The Treasury does not store "funds" which are then spent at a later date (although this is how it tends to be conceptualized). <br /><br />When the Treasury receives money (its own IOUs), this money is "deleted" (i.e. Treasury liabilities are "extinguished"). <br /><br />When the Treasury spends, money is "created" - given that "money" is ultimately a Treasury IOU or Treasury liability) - see my comment above.<br /><br />The Fed issues IOUs on behalf of the Treasury, but these IOUs are only "extinguished" when they are transferred (paid) to the Treasury. <br /><br />Given that the Fed's job is to control interest rates and manage inflation, the process of selling and buying government bonds is simply a convoluted way of achieving those aims. <br /><br />It's not about placing "funds" in the Treasury's account which can then be spent.<br /><br />When the Treasury issues bonds, it's not desperately worrying about whether anyone will buy them. They will be bought. Their only purpose is to provide a mechanism by which the government can control interest rates and manage inflation. <br /><br />I'm sure Ramanan will disagree with this.ynoreply@blogger.com