An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Tuesday, June 18, 2013
Andrew Lainton — Consolidating Central Bank and Central Government Accounts – The Mark to Market Problem
I'm with Neil on this one...any central bank/Treasury arrangement is nothing more than a Rube-Golbergesque accounting construction that can always be made "solvent" by creating entries from thin air.
Banks are fully dependent on incomes generated by public spending in any case...and public spending has no functional limit.
I thought the concept of goodwill didn't apply very well to monopolies - if you have a monopoly then brand, reputation, other intangibles don't mean much. Other than political ability to maintain the monopoly (which is outside of accounting anyway).
So, why a central bank should have any goodwill in an accounting sense (yes, in a political sense), is beyond me.
Might want to correct that link since they both go to the same place.
ReplyDeleteThanks Senexx. Link fixed.
ReplyDeleteI'm with Neil on this one...any central bank/Treasury arrangement is nothing more than a Rube-Golbergesque accounting construction that can always be made "solvent" by creating entries from thin air.
ReplyDeleteBanks are fully dependent on incomes generated by public spending in any case...and public spending has no functional limit.
Here's a model of the system:
https://dl.dropboxusercontent.com/u/33741/SB%20model%20wBanks.png
Where does the CB fit in?
Paul, where's that diagram from?
ReplyDelete"Paul, where's that diagram from?"
ReplyDeleteFrom my CAD program. The model is my view of the system.
It's the sectoral balances model with a bank circuit added.
I thought the concept of goodwill didn't apply very well to monopolies - if you have a monopoly then brand, reputation, other intangibles don't mean much. Other than political ability to maintain the monopoly (which is outside of accounting anyway).
ReplyDeleteSo, why a central bank should have any goodwill in an accounting sense (yes, in a political sense), is beyond me.