tag:blogger.com,1999:blog-2761684730989137546.post7472889379347697934..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: Comparison of China and US’ Bank Reserves and Their Implicationsmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-2761684730989137546.post-72109470514487979262018-10-12T22:17:58.238-04:002018-10-12T22:17:58.238-04:00Keep dreaming...Keep dreaming...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-49076034607764801042018-10-12T16:23:24.991-04:002018-10-12T16:23:24.991-04:00100% private banks with 100% voluntary depositors ...100% private banks with 100% voluntary depositors would have no capital or liquidity requirements.<br /><br />Why don't you advocate those, Franko?Andrew Andersonhttps://www.blogger.com/profile/14296407661618321637noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-27769860570460026222018-10-12T11:25:10.801-04:002018-10-12T11:25:10.801-04:00Should be : “banks would need 2T of capital just t...Should be : “banks would need 2T of capital just to finance the 20T of reserves“Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-31889751797874107152018-10-12T11:24:03.563-04:002018-10-12T11:24:03.563-04:00“the central bank has to sell debt so as to damp d...“the central bank has to sell debt so as to damp down demand”<br /><br />That is not why they sell debt...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-17371968528726457292018-10-12T11:21:21.033-04:002018-10-12T11:21:21.033-04:00If govt stopped issuing bonds then reserve assets ...If govt stopped issuing bonds then reserve assets would skyrocket at the depositories...<br /><br />We’d be like another Japan with asset prices falling for 30 years... Nikkei last high in 1989...<br /><br />There is like 20T of US bonds currently issued... banks would need 2T of capital just to finance the 2T of reserves... which they only have about 1T now....<br /><br />It would crash the whole thing like China is doing this year...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-90200541707594113792018-10-12T09:44:05.257-04:002018-10-12T09:44:05.257-04:00Matt, There is no need for "reserve drains&qu...Matt, There is no need for "reserve drains" if the amount of base money / reserves issued is just enough to induce the private sector to spend at a rate that brings full employment without exacerbating inflation too much. In contrast, if government borrows too much, then "Private Sector Net Financial Assets" (i.e. the stock of base money and government debt) gets excessive, which results in excess private sector spending, which in turn means that "drains" are needed: i.e. the central bank has to sell debt (i.e. raise interest rates)so as to damp down demand. That's exactly what is happening at the moment: Trump is borrowing too much, so the Fed raises interest rates to compensate. <br /><br />Re loans for houses and cars, I don't see why an absence of interest yielding government debt stops private banks lending. Banks lend, when they spot viable borrowers, by simply creating the necessary money out of thin air and crediting that money to borrowers accounts. That money is then deposited in other bank accounts. As long as a bank lends just to viable borrowers rather than losers, the fact that the bank doesn't have a stock of government debt is irrelevant. Plus banks need very little reserves for daily settling up purposes.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-91833071128468283042018-10-12T07:45:53.979-04:002018-10-12T07:45:53.979-04:00“no government borrowing at all.“
Well if Treasur...“no government borrowing at all.“<br /><br />Well if Treasury issuance is a “reserve drain” then if you don’t issue any bonds how will any reserves get “drained”?<br /><br />Banks would end up using all of their capital just to finance the reserves and nobody could get a loan for a house or a car from a bank....Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-56129177510690663132018-10-12T00:16:13.713-04:002018-10-12T00:16:13.713-04:00Warren Mosler and Bill Mitchell argue that the bes...Warren Mosler and Bill Mitchell argue that the best arrangement is simply to issue whatever amount of base money (aka reserves) the private sector wants to hold at a zero rate of interest, and have no government borrowing at all.<br /> <br />For Mosler, see 2nd last para here:<br />http://www.huffingtonpost.com/warren-mosler/proposals-for-the-banking_b_432105.html<br />And here: http://www.cfeps.org/pubs/wp-pdf/WP37-MoslerForstater.pdf<br /><br />For Bill Mitchell, see here:<br />http://bilbo.economicoutlook.net/blog/?p=31715<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.com