tag:blogger.com,1999:blog-2761684730989137546.post5048967283696126113..comments2024-03-28T20:28:01.733-04:00Comments on Mike Norman Economics: JKH — ‘Loans Create Deposits’ – in Contextmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger149125tag:blogger.com,1999:blog-2761684730989137546.post-3337563452982145822013-02-23T18:33:58.570-05:002013-02-23T18:33:58.570-05:00Why would anyone wish to write off total servitude...<i>Why would anyone wish to write off total servitude of the 99% by the 1%?</i><br /><br />Free people have essentially two recourses. First, to work through the electoral process toward the desired change. Secondly, if the state has been captured by a cohort to the degree that the electoral process has been subverted, then revolt is the only recourse that remains.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-74559968942641535792013-02-23T18:30:14.690-05:002013-02-23T18:30:14.690-05:00IF the borrower doesn't pay back one cent afte...<i>IF the borrower doesn't pay back one cent after 'spending ' the loaned amount, DID or DID NOT that 'vertical' money become redeemed as 'horizontal ' money??</i><br /><br /><br />The bank loan creates a deposit (bank money). The borrower withdraws the amount of the loan in cash (which the bank got as vault cash from the Fed in exchange for reserve balance). The borrower spends the cash on goods and services, or blows it in the casino, whatever. The borrower then goes bankrupt with no assets to serve as collateral, so the loan is a total loss to the bank. The bank deducts the loan amount from assets and also from equity. The cash is still in circulation as a non-govt asset and govt liability. All books balance, and the bank's equity holders are poorer.<br /><br /><i>If the borrower pays the loan ('vertical' money) back in full,if interest were $16 trillion-good number to use since it is the debt via accumulated interest- DID or DID NOT that "vertical" money take away from the sovereignty the " horizontal ' money ($16 trillion)and give it to the PFPB ?</i><br /><br />How does this diminish the sovereignty of the currency issuer who has chosen to use banks as agents in risk management, capable of extending credit that govt provides liquidity to settle? I don't see that horizontal and vertical affect sovereignty. The govt allows banks to leverage its money (HPM) through credit extension and to charge for assuming the credit risk. Thus the banks are agents of the govt to whom govt has delegated credit extension and the attendant risk, while remaining the sole provider of the currency. In doing this, govt also assumes risk, since it has to ultimately stand behind the system in case of market failure.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-4606080666672409822013-02-23T18:19:38.687-05:002013-02-23T18:19:38.687-05:00" Write it off to cronyism and corruption.&qu..." Write it off to cronyism and corruption."<br />Why would anyone wish to write off total servitude of the 99% by the 1%?<br />Why would anyone not..."after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddhajustaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-61779252418342602862013-02-23T17:46:43.467-05:002013-02-23T17:46:43.467-05:00"Bank money is a promise to settle in the gov..."Bank money is a promise to settle in the government's money on demand."<br />Yes and a loan from a bank is 'bank money ' given to a borrower who wishes to use that promise to be able to exchange for "goods and services"<br />IF the borrower doesn't pay back one cent after 'spending ' the loaned amount, DID or DID NOT that 'vertical' money become redeemed as 'horizontal ' money??<br />If the borrower pays the loan ('vertical' money) back in full,if interest were $16 trillion-good number to use since it is the debt via accumulated interest- DID or DID NOT that "vertical" money take away from the sovereignty the " horizontal ' money ($16 trillion)and give it to the PFPB ? <br />Oh well, like Wm Black says, "The best way to rob a bank is to own one."justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-65893349905647023302013-02-23T17:30:09.116-05:002013-02-23T17:30:09.116-05:00All that you say about the extension of "forb...All that you say about the extension of "forbearance" to the banks by the Fed as the govt's bank is true. Randy Wray and Bill Black have written extensively about this. Write it off to cronyism and corruption.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84260352057017373722013-02-23T17:26:51.499-05:002013-02-23T17:26:51.499-05:00IN the US, currency is defined as coin minted by T...IN the US, currency is defined as coin minted by Treasury, Federal Reserve notes, and reserve balances at the Fed. Banks cannot issue any of these. They have to obtain them from the govt or from other banks that obtained them from the govt for final settlement, either in interbank settlement system operated by the Fed in which all transactions are in rb or at the window through cash withdrawal. <br /><br />Bank money is a promise to settle in the government's money on demand, the fact that many intra and interbank transaction settle by netting notwithstanding.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-8122638761661984132013-02-23T17:26:08.426-05:002013-02-23T17:26:08.426-05:00Where we went wrong:
While we were sleeping on our...Where we went wrong:<br />While we were sleeping on our rights, we allowed private for profit banks to have legislation passed that allows the PFPB to 'print' temporary currency and to TAX that currency via compound interest. A scheme that must stop or it will allow the PFPB to "gain the entire wealth of the world" and still be owed servitude. <br />CHALLENGE, IMPROVE, POST ! <br />"Justaluckyfool" (GOOGLE)justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-25101040855227759452013-02-23T17:10:41.342-05:002013-02-23T17:10:41.342-05:00"Banks can only create credit. they cannot cr..."Banks can only create credit. they cannot create currency."<br />I find this statement to be false.<br />If the TBTF banks had $36 trillion outstanding in residential and commercial real estate loans in 2007 and payment stopped coming in and the banks were forced to modify those loans at fair market value, say $29 trillion, would they have left $7 trillion in redeemed sovereign currency (base money)?<br />For when they 'loaned' the $36 trillion they clicked that amount into the accounts with a condition that "when used if would be legal tender". Please tell me who would borrow and pay interest on money that could not be spent?<br />As for the bank they use this "to be used money" to make a profit of double, even quadruple what they 'loan' Yes $36 trillion at av. 6% for av. 36 years allows them to appropriate $144 trillion from the people and get to use REAL BASE MONEY for their own special interest, maybe even to buy a government??? justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-8412317939106148812013-02-23T13:41:50.011-05:002013-02-23T13:41:50.011-05:00“Believe nothing merely because you have been told...<i>“Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha</i><br /><br />"Question authority."Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-55205080483606852362013-02-23T13:38:31.335-05:002013-02-23T13:38:31.335-05:00My understanding is that banks issue checks denomi...<i>My understanding is that banks issue checks denominated in the sovereign's currency by creating the money from nothing but the asset/liability basis of the debt instrument and the collateral, summing both together to zero on their account. This is a privilege granted by the sovereign government to a private entity which endangers economic stability. When money supply is diminished by saving during a recession by paying up debts, while at the same time issuance of new money is dependent upon the banks judgment that new borrowers have sufficient collateral and income to assure their profit, money supply becomes dependent upon these private banks.</i><br /><br />Banks can only create credit. they cannot create currency. When currency is required for settlement, they have to obtain it from govt at the cost the govt sets, the interest rate, in the US the FFR.<br /><br />IN the most general case or base case of non-convertible floating rate currency of which the govt is the sole provider, only govt issue money on it own terms. In such a case all transactions in the unit of account are conducted in the govt's money-thing. This is exogenous to non-govt. Credit can be created privately that is denominated in the unit of account, but not by banks as agents of govt with direct access to the currency issues, e.g. a central bank.<br /><br /><br />Under capitalism, however, govt delegates the power to create credit denominated in the govt's unit of account to banks, giving them access to the currency issuer for liquidity in settlement, and govts also agree to provide liquidity in the currency for final settlement. The govt can also delegate interest rate setting to the private sector as the UK opted for with Libor, which was set by the banks.<br /><br />This arrangement of delegating money creation powr through bank credit creates the possibility of financial instability through imprudent extension and use of credit. Govts are supposed to limit this in the public interest through bank regulation but banks often evade this limitation as a result of moral hazard created by govt through special treatment like guarantees, explicit and implicit, as well as due to cronyism and corruption.<br /><br />Money supply only becomes dependent on private banks to the degree that govt authorizes it and permits it. At any point govt can change the institutional arrangements (rules), even to the point of nationalizing banking. <br /><br />Govt can also inject funds directly into non-govt through transfers, think Bush's sending everyone a Treasury check, and withdraw funds by taxes and levies.<br /><br /> Just as govt can delegate powers, it can change the rules and also take back the powers it delegates.<br /><br />Historically the amount of control over credit money creation that govt delegates banks expands and contracts depending on circumstances. An expansionary phase led to the crisis and the US is now in a contractionary phase. Same thing happened leading up to the Great Depression and afterwards. It's cyclical as MInsky observed.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-80321226824013175212013-02-23T13:14:13.599-05:002013-02-23T13:14:13.599-05:00The limitations on issuance are availability of re...<i>The limitations on issuance are availability of real resources for purchase in the currency, price stability, and the fx rate." correct? It states there is a limitation?<br />Isn't that contrary to it MMT ?</i><br /><br />MMT describes the current monetary system in general and also special cases in the different jurisdiction that have modified the general case (base case) politically.<br /><br />The general case is that that governments that are currency sovereign and exercise full currency sovereignty without political restraints that create special cases still operate under the real constraint of available resources. Obviously, the govt cannot purchase with its currency what is not for sale. It is must have it, then the alternative is doing without if it doesn't exist or confiscation or imminent domain if it does but the owner is unwilling to sell.<br /><br />Governments that are full currency sovereigns in the sense that they do not impose political restriction on the exercise thereof still have to operate within the confines of acceptable levels of price stability and foreign exchange rates. So while in principle there is no absolute limitation on the size of a fiscal deficit a government can run, if the deficit exceeds non-govt saving desire at full employment, then deficit will result in inflation. Similarly, the exchange rate affects firms that export driven.<br /><br />The MMT economists never said that that there are no operational constraints or politically imposed restraints. They have always set forth what these are.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-63374221860779220422013-02-23T12:01:29.907-05:002013-02-23T12:01:29.907-05:00READ MORE: http://bit.ly/MlQWNs
**** “Believe n...READ MORE: http://bit.ly/MlQWNs <br />**** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddhajustaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-38724315863671544142013-02-23T11:14:26.785-05:002013-02-23T11:14:26.785-05:00@Tom Hickey, thanks for the reply.
I hope that t...@Tom Hickey, thanks for the reply.<br /> I hope that this blog will continue to allow these post, and the questions and answers.<br />1.. Is a MS limited as to the amount of currency it can print?<br />Is your response,"The limitations on issuance are availability of real resources for purchase in the currency, price stability, and the fx rate." correct? It states there is a limitation?<br />Isn't that contrary to it MMT ?<br />2."Everything but use of commodities, e.g., bullion weight, in exchange for commodities involves fiat, which means "let it be," e.g. if seigniorage is involved. So a government can declare a metal coin to be valued at face value instead of the value of the metal." IF the MS 'declares its value' it is fiat currency and no longer a commodity since its value is now dependant upon redemption by the 'good faith and credit of the sovereignty.<br />Most important, after having read: MMP BLOG #6: WHAT IS A SOVEREIGN CURRENCY? one must go back to the question, Why are legitimate questions un anawered ?<br />Excerpt:<br /><br />"The sovereign government, alone, has the power to determine which money of account it will recognize for official accounts (as discussed, it might choose to accept a foreign currency for some payments—but that is the sovereign’s prerogative). Further, modern sovereign governments, alone, are invested with the power to issue the currency denominated in its money of account.<br />If any entity other than the government tried to issue domestic currency (unless explicitly permitted to do so by government) it would be prosecuted as a counterfeiter, with severe penalties resulting.<br />Please note comments and questions .....unanswered.<br /><br /> Anonymous | July 13, 2011 at 10:48 am | Reply <br /> "If any entity other than the government tried to issue domestic currency (unless explicitly permitted to do so by government) it would be prosecuted as a counterfeiter, with severe penalties resulting."Is the monetizing of private bank debt created on a ledger accounted for in the MMT model?My understanding is that banks issue checks denominated in the sovereign's currency by creating the money from nothing but the asset/liability basis of the debt instrument and the collateral, summing both together to zero on their account. This is a privilege granted by the sovereign government to a private entity which endangers economic stability. When money supply is diminished by saving during a recession by paying up debts, while at the same time issuance of new money is dependent upon the banks judgment that new borrowers have sufficient collateral and income to assure their profit, money supply becomes dependent upon these private banks. How is the seigniorage of a “trillion dollar coin” not issued through bank debt accounted for? Does MMT show a public benefit to treasury issued money, not passing through a private bank system, but spent directly into circulation?<br />...cont.justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-90908145365347475982013-02-22T18:43:46.859-05:002013-02-22T18:43:46.859-05:00BTW, it is interesting to note that in the US, the...BTW, it is interesting to note that in the US, the sovereign states agreed to limit their sovereignty when they joined the federation, which is different from limiting sovereignty by treaty. As sovereign state remains sovereign in making treaties and can withdraw from them as an exercise of sovereignty. However, as the Civil War showed, once sovereignty is limited by joining a federation it cannot be used to withdraw unilaterally.<br /><br />The US Constitution, article 1, section 8, gives the "money power" to the federal legislative branch, while article 1, section 10 gives the states certain limited money powers. Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46742977733264504562013-02-22T18:36:19.191-05:002013-02-22T18:36:19.191-05:00See Randy Wray, MMP BLOG #6: WHAT IS A SOVEREIGN C...See Randy Wray, <a href="http://neweconomicperspectives.org/2011/07/mmp-blog-6-what-is-sovereign-currency.html" rel="nofollow">MMP BLOG #6: WHAT IS A SOVEREIGN CURRENCY?<br /></a><br /><br />Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-85068267593533651742013-02-22T18:29:16.344-05:002013-02-22T18:29:16.344-05:00Well, you should ask the MMT pros. Mosler is out t...Well, you should ask the MMT pros. Mosler is out the loop now that comments are shut down at his place, but the rest of the MMT economists blog at New Economic Perspectives.<br /><br /><i>1. Must a Monetary Sovereignty be the sole issuer of the sovereign currency?</i><br /><br />Every sovereign govt is sovereign in its currency, unless it chooses to use another currency by treaty, as in the EZ, where the common currency is the euro, or by voluntary choice, e.g., Ecuador has chosen to use the USD as the unit of account and medium of exchange. Since the govt cannot issue the currency it gives up currency sovereignty for as long as that choice lasts.<br /><br />Convertibility and fixed rates limit the capacity of the sovereign to control its currency, i.e., limit currency sovereignty. The govt accepts conditionality in the use of currency that limits currency sovereignty.<br /><br />The currency sovereign can also delegate all or some of its authority to agents, such as an independent central bank that is privately own and to private commercial banks. when govts do this they usually maintain control through imposition of law and regulation. These choices of the sovereign are always reversible since sovereignty is absolute. As long as the govt maintains control over the currency its remains fully sovereign. To the degree it subjects itself to conditions, it limits sovereignty.<br /><br />Govt may also decide to limit its sovereignty by allowing other money things to be used in payment of taxes. If it accepts other money things rather than its own currency in payment of taxes it has forfeited sovereignty as long as this lasts.<br /><br />The choices the currency sovereign makes in this regard affect the policy space available to it. Limitations on sovereignty limit policy space.<br /><br /><i>2. A Monetary Sovereignty can issue all the currency that it needs or desires, but is constrained by moral hazard, or by its ability to control the quantity or quality of that currency?</i><br /><br />The limitations on issuance are availability of real resources for purchase in the currency, price stability, and the fx rate.<br /><br /><i>3.Must all sovereign currency be fiat (as the actual value-goods and services are not per se electronically transferable)since the currency is merely a legal representation of all goods and services of the entire social group?</i><br /><br />Everything but use of commodities, e.g., bullion weight, in exchange for commodities involves fiat, which means "let it be," e.g. if seigniorage is involved. So a government can declare a metal coin to be valued at face value instead of the value of the metal. IN this sense, "fiat" currency means any unit of account the government declares necessary that for payment of taxes of which it is the sole provider, although it can delegate this power to agents, such as a central bank, under terms that it controls. <br /><br />Central banks are only independent to the degree that chooses and only for as long as govt chooses. For example, the Bank of England was privately owned until it was nationalized in 1946. But Britain still had a sovereign currency.<br /><br />Generally speaking tho, "fiat currency" means currency that is not convertible into a real numeraire like gold or silver at a fixed rate of exchange, i.e., has no "real" (commodity) backing.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-15748390163144736002013-02-22T17:45:23.123-05:002013-02-22T17:45:23.123-05:00@ ALL MMT advocates.
How do you expect to have peo...@ ALL MMT advocates.<br />How do you expect to have people believe you are correct when you consider valid questions as frivolous and or simple ignore any questions?<br />Even believers have difficult defining what is MMT belief?<br />Will Wray, Mosler, and dozens of others agreed to the same answer?<br /><br />1. Must a Monetary Sovereignty be the sole issuer of the sovereign currency? <br />2. A Monetary Sovereignty can issue all the currency that it needs or desires, but is constrained by moral hazard, or by its ability to control the quantity or quality of that currency?<br />3.Must all sovereign currency be fiat (as the actual value-goods and services are not per se electronically transferable)since the currency is merely a legal representation of all goods and services of the entire social group? <br />Can you get a definitive answer from 51% or more of believers, or even get a website where the questions can be asked?<br /><br />justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-90314089381631218202013-02-22T16:31:00.252-05:002013-02-22T16:31:00.252-05:00@ Jose
I did
"Not all. I can't speak fo...@ Jose<br /><br />I did<br /><br />"Not all. I can't speak for the MMT economists but they expect other economists to digest their work before they criticize straw men."<br /><br />MMT economists have decided that their time is better spent than responding to criticism they see as frivolous. That included erecting straw men because the person criticizing either does understand the MMT position correctly, either for lack of economic chops or failure to do the research. Or else is trolling.<br /><br />I suspect this why Warren shut down his comment section. To much time wasted dealing with frivolity. I notice that others shutting down their comments, too (Barry Ritholz) and others just flush many of the comments (DeLong).Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-57364047640332379442013-02-22T16:19:59.265-05:002013-02-22T16:19:59.265-05:00@ Tom,
Would you say then, that people should abs...@ Tom,<br /><br /><i>Would you say then, that people should abstain from making criticisms (incuding minor ones) of MMT, because there is the risk of said criticism being misinterpreted?</i><br /><br />I thought you were going to answer my question :)Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81658983412613644852013-02-22T16:19:17.123-05:002013-02-22T16:19:17.123-05:00@ Tom,
Would you say then, that people should abs...@ Tom,<br /><br /><i>Would you say then, that people should abstain from making criticisms (incuding minor ones) of MMT, because there is the risk of said criticism being misinterpreted?</i><br /><br />I thought you were going to answer my question :)Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-39186942771060154962013-02-22T14:22:59.414-05:002013-02-22T14:22:59.414-05:00Would that be a "YES"
Banks would not -l...Would that be a "YES"<br />Banks would not -lend to each other.<br />Translated: Would not accept their 'legally printed counterfeit'<br />and maybe even the 'Invisible Hand' <br />doesn't know how much that is. The Fed had to "print" $16 trillion, just to keep the doors open. (OCC.gov not only verifies the amount but names who got what).<br />So why do we not address this "known flaw" of American capitalism?<br />As Wm. Black and Michael Hudson prove over and over.<br />Why do you not wish prosperity for yourselves and your children?<br />"QE 4 The People" End issuance taxation by the private for profit banks (PFPB).justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84723672992259461812013-02-22T14:02:23.614-05:002013-02-22T14:02:23.614-05:00In 2008 when the housing bubble was pricked, I ask...<i>In 2008 when the housing bubble was pricked, I ask, would the currency have collapsed if the <br />"BAD MONEY" issued by the TBTF banks was not backed up by "Good Money" from the Feds ? Would any other bank have accepted electronic transfers from the TBTF banks? Is this what is meant by "systemic failure" ?</i><br /><br />The issue was interbank lending when most banks were technically insolvent or suspected to be. The banks would not lend to each other, so the payments system froze for lack of liquidity. Then the Fed stepped in by opening the discount window to all and instituting the many programs it did after that. That intervention kept the system going.<br /><br />What would have happened otherwise. The TBTF would have been declared insolvent by regulators and by put into resolution after which they would have emerged with new ownership and new management like is supposed to happen in capitalism. Basically the govt did not follow the law because of cronyism according to knowledgeable critics like Bill Black.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-8506622101519768132013-02-22T13:47:21.184-05:002013-02-22T13:47:21.184-05:00@Tom Hickey:"Taxation is different from confi...@Tom Hickey:"Taxation is different from confiscation and currency issuance is different from counterfeiting because both are undertaken (v)ia law passed in a democratically elected assembly.<br />Justaluckyfool says, "Making it legal does not change what it is.<br />Taxation is not 'per se' evil or bad when properly administered and it is necessary for the control of the quality and quantity of the currency. Also a great means for redistribution of the currency from the whole social group to sectors of the group.<br />As for issuance: (Quote Soddy), "It was recognized in Athens and Sparta ten centuries before the birth of Christ that one of the most vital prerogatives of the State was the sole right to issue money. How curious that the unique quality of this prerogative is only now<br />being re-discovered. The" money-power " which has been able to overshadow ostensibly responsible government, is not the power of the merely ultra-<br />rich, but is nothing more nor less than a new technique designed to create and destroy money by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of the community or the real role that money ought<br />to perform therein." <br />While "the people" slept on their rights and duty, counterfeiting by banks was pronounced as legal.<br />BUT EVEN MORE DUMB, "we the People" allow them to charge us compound interest on that counterfeit money. Get this,we repay them with "GOOD MONEY".<br />Justaluckyfool say, 'Beware Gresham's Law' !<br />In 2008 when the housing bubble was pricked, I ask, would the currency have collapsed if the <br />"BAD MONEY" issued by the TBTF banks was not backed up by "Good Money" from the Feds ? Would any other bank have accepted electronic transfers from the TBTF banks? Is this what is meant by "systemic failure" ?<br />Please help this fool with any profound answer.justaluckyfoolhttps://www.blogger.com/profile/13106732881109899340noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-53303496757419997032013-02-22T03:12:54.042-05:002013-02-22T03:12:54.042-05:00Maybe someone can comment on my thoughts…
Here is...Maybe someone can comment on my thoughts…<br /><br />Here is why it seems to me that 'creating money' and 'destroying money' are reasonable conceptions for deficit spending:<br /><br />For both situations, assume that the Fed performs the neccessary OMOs to maintain it's target FFR….<br /><br />Situation #1: The Treasury obtains a balance in it's account before it spends. Here we can say the U.S. government 'borrows first, and spends second'<br /><br />In this situation it seems that the U.S. government is redistrbuting money already in circulation.<br /><br />Situation #2: The Treasury spends without obtaining a balance in it's account. Here we can say the U.S. government 'spends first, and borrows second'<br /><br />In this situation it seems that the U.S. government is creating money and spending it into circulation.<br /><br />My point: in both situations the 'economic effect' on the real economy is exactly the same. Clearly in situation #2 the U.S. government is creating money when it spends, but it's not so clear in situation #1. Yet, for all intents and purposes, they are the exact same thing, just don't in opposite order.<br /><br />So why is unreasonable to call this money creation?<br />JKhttps://www.blogger.com/profile/10304508322452669073noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-11850526219911183892013-02-22T00:47:14.178-05:002013-02-22T00:47:14.178-05:00by first confiscating (taxes)
Taxation is differe...<i>by first confiscating (taxes)</i><br /><br />Taxation is different from confiscation and currency issuance is different from counterfeiting because both are undertaken iaw law passed in a democratically elected assembly. Equating them ignores the liberalization and democratization of society historically.<br /><br />On the other hand, I see most of the monetary problems the US is facing as resulting from the diminishing govt power to tax the rich through the political process, since govt has effectively fallen into the hands of an oligarchy of wealth, power, and privilege similar to feudalism.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.com