The previous post finished with the observation that, since the sum of all Equity is zero, and the banking sector must be in positive equity, part of the remainder of the economy - the government, or the non-bank public - must be in negative equity. So which sector is better equipped to handle that: the non-bank public, or the government?…
In the next post, I'll consider what the impact is of different fiscal regimes: the government running a deficit (as the USA has for most of the last 120 years - roughly of 2.5% of GDP); the government running a surplus; the government running a surplus and the private sector borrowing from the Banking Sector; the government running a surplus and the private sector reducing its debt to the Banking Sector; and the government running a deficit while the private sector reduces its debt to the Banking Sector.
econintersect.com
A Mathematical Model Of Modern Monetary Operations - 2: Simulating MMT
Steve Keen, Patreon.com
A Mathematical Model Of Modern Monetary Operations - 2: Simulating MMT
Steve Keen, Patreon.com
3 comments:
Keen discovers Accounting.....
I wonder how much longer it'll take him to discover collateral and ownership equity?
There is no negative equity at the central bank because the central bank is under "control" of the Treasury and therefore forms a group entity with it.
Therefore when Treasury issues Bond assets to the Central Bank as collateral, which the central bank then discounts into liabilities (aka money), that is mirrored at the Treasury by a Bond liability to the Central Bank and an increase in Assets at the Treasury representing the ownership/control of the central bank.
Nothing negative anywhere - particularly if the Central Bank faces the Bonds by treating them as a repo.
“There is no negative equity at the central bank“
Well negative equity is insolvency or bankruptcy in the Finance and Accounting Science so it is to be avoided... in fact there is a law in US that says the CB must maintain Equity of around $8B maximum iirc and any balance over that has to be transferred periodically to the US Treasury...
These people are I guess too stupid to understand Accounting so they want to bring the rest of us who are trained and qualified in Finance and Accounting Sciences down to their moron level...
They are always big advocates of “equality!”... in this case if they are stupid they think the rest of us should be stupid too so we’d be equal...
Post a Comment