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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Wednesday, March 7, 2018
Ramanan — Wynne Godley And Non-selective Protectionism
The question is or should be: "Why would foreigners sell us real goods (and services) in net for mere account balances at the Federal Reserve?"
Surely part of the answer is positive yields on the inherently risk-free sovereign debt of the United States of America.
So, in addition to ethical reasons, how about we abolish non-negative* yields on US sovereign debt (i.e. welfare proportional to account balance) to help balance the US trade deficit?
The problem with MMT folks is that they have not taken the thinking about what gives value to fiat to its logical conclusion?
*An exception is that every US citizen should have a negative-interest-free demand account at the FED up to, say, $250,000.
I agree with Andrew. Warren Mosler and Milton Friedman argued that government should pay no interest on its liabilities.
Having done that, let foreigners have all the account balances at the Fed they want. Then rob them by ensuring a modest amount of inflation every year.
I'm all for cheating, lying, robbing, skullduggery, fraud, etc etc....:-)
Having done that, let foreigners have all the account balances at the Fed they want. Ralph Musgrave
Sure, let foreigners have all the account balances at the Fed they want but charge them for them with negative interest on those accounts. And since account balances at the Fed have the shortest maturity wait of any sovereign debt (zero wait) then the interest charged should be highest of any US sovereign debt.
Net importers benefit wrt to goods in real terms of trade.
Net exporters benefit in terms of capital accumulation — financial and non-financial. The non-financial capital formation is the benefit in real terms of trade.
The US has gained in terms of receiving real goods but has exported entire industries.
The "cost" to net exporters is willingness to accumulate financial capital of the net importer as well as non-financial.
BTW, the accumulation of non-financial capital by net exporters includes investment of financial capital, technology and expertise on the part of net importers.
Its' a two-way street and according to economic theory, all parties are maximizing preferences in terms of opportunity cost, so what's not to like?
Thanks for linking Tom.
ReplyDeleteNot just 1995 but all papers which have the proposal.
Thanks for the heads up. I just added "and more."
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteThe question is or should be: "Why would foreigners sell us real goods (and services) in net for mere account balances at the Federal Reserve?"
ReplyDeleteSurely part of the answer is positive yields on the inherently risk-free sovereign debt of the United States of America.
So, in addition to ethical reasons, how about we abolish non-negative* yields on US sovereign debt (i.e. welfare proportional to account balance) to help balance the US trade deficit?
The problem with MMT folks is that they have not taken the thinking about what gives value to fiat to its logical conclusion?
*An exception is that every US citizen should have a negative-interest-free demand account at the FED up to, say, $250,000.
I agree with Andrew. Warren Mosler and Milton Friedman argued that government should pay no interest on its liabilities.
ReplyDeleteHaving done that, let foreigners have all the account balances at the Fed they want. Then rob them by ensuring a modest amount of inflation every year.
I'm all for cheating, lying, robbing, skullduggery, fraud, etc etc....:-)
The interest has been zero for the last 9 years yet the USD zombies hoarded the most USD ever...
ReplyDeleteIt’s not the interest....
What propels a zombie?
What propels a zombie? Franko
ReplyDeleteI'm arguing for NEGATIVE interest rates/yields on the debt of a monetary sovereign, not 0%.
0% allows the zombies to stagger on; negative yields/interest would slowly kill them AND generate revenue for the FED/US Government at the same time.
Having done that, let foreigners have all the account balances at the Fed they want. Ralph Musgrave
ReplyDeleteSure, let foreigners have all the account balances at the Fed they want but charge them for them with negative interest on those accounts. And since account balances at the Fed have the shortest maturity wait of any sovereign debt (zero wait) then the interest charged should be highest of any US sovereign debt.
What propels a zombie?
ReplyDeleteNet importers benefit wrt to goods in real terms of trade.
Net exporters benefit in terms of capital accumulation — financial and non-financial. The non-financial capital formation is the benefit in real terms of trade.
The US has gained in terms of receiving real goods but has exported entire industries.
The "cost" to net exporters is willingness to accumulate financial capital of the net importer as well as non-financial.
BTW, the accumulation of non-financial capital by net exporters includes investment of financial capital, technology and expertise on the part of net importers.
Its' a two-way street and according to economic theory, all parties are maximizing preferences in terms of opportunity cost, so what's not to like?