One phrase that keeps being used by mainstream economists is "fiscal dominance." This is a fuzzy term that is being used to express disapproval but yet appearing to be a neutral technical term. However, the simplest way to view the discussion is that neoclassical economics was ambushed by reality, and that they are hiding behind jargon to distract from this....Bond Economics
Fiscal Dominance As Obfuscation
Brian Romanchuk
2 comments:
“At the time of the Maastricht Treaty, high government debt was seen as a major threat to central bank independence, and it was feared that fiscal dominance could induce a central bank to deviate from its monetary policy objectives, endangering price stability.“
It’s not going to endanger price stability to the upside as implied here ... current CB policy acts counter to fiscal increases in that the CB asset purchases create increasing Reserve Assets at the banks which have to be offset by a reduction in price of current bank risk asset prices and rate reductions decrease fiscal transfers in interest income...
The problem with price stability (to upside) may occur when (if ever?) they reverse this policy and start to reduce CB assets and increase rates as that will allow banks to increase asset prices $4$ with any CB reduction in reserve assets and the rate increases will increase fiscal transfers in interest income...
The system allows additional credit to be established EITHER by the CB OR the member banks but NOT BOTH at the same time...
“monetary policy will have no effect on the economy if the intermediary banks are melting down and are unwilling or unable to borrow and lend.“
C’mon Brian they are not “melting down!” that is figurative language... what is really happening in professional/technical terms?
Why did you train in all of that regulatory mathematics? To do creative writing????
Examine that “melting down!” process in the context of proper Accounting and regulatory mathematics...
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