Tuesday, March 20, 2012

Steve Roth adds his take on JKH's post

JKH has magisterial post up on the recent dust-up over Saving as perceived in various sectoral models — one-sector (global, for instance, or government- and trade-balanced domestic private sector); two-sector (government and private including international); the most common MMT construct, the three-sector model (government, domestic private, and international); the rather uncommon four-sector model (government, international, domestic household, and domestic business); or even a seven-billion-plus-sector model, in which each individual (and business, and government) is represented as a sector.
His key point, I think — one I agree with profoundly — is that people need to be very clear on which model they’re assuming when they use the word Saving, or the construct “S.” (People sometimes use those two differently, with different implied sectoral models, sometimes within a single discussion or even a single sentence.) In most cases the different constructs of saving and S that people throw around are absolutely valid within their (implicit) sectoral models. The problem arises when people are talking about different sectoral consolidations within the same discussion, without themselves and/or their interlocutors being (fully) aware of it.
I’ve left a few glancing comments over there, but it’s prompted me to write up some thinking here that’s conceptually related.
Read it at Asymptosis
Thinking About the Fed
by Steve Roth
Crossposted at Angry Bear

Steve reflects cursorily about the nature of the Fed and its relation ship to the federal government, the Treasury specifically, and the private banking system, proposing four different ways of thinking about this, and invites others to specify this more rigorously in terms of current institutional arrangements and operations.

I my view this kind of articulation is needed, since all these views, and probably some more are currently being either advanced or presumed. This is an area of significant contention, and it comes up as soon as I start discussing MMT with many people who are a particular conception of this, usually different from the way MMT frames it. As usual, the framing of the matter is crucial to discussion of related issues.


Matt Franko said...


If you view Bernanke's GWU lecture at the link down thread, right in his intro he very clearly states that the Fed is a part of the government...

Further in his presentation he contrasts this with historic instances where there were other forms of non-govt sector central bank(s) in US history.

Only the tin foil hat people would believe otherwise...


JJ said...

The Fed is constitutionally part of the executive branch of the US government.