tag:blogger.com,1999:blog-2761684730989137546.post7931139690941825108..comments2024-03-28T04:13:36.779-04:00Comments on Mike Norman Economics: Prakash Loungani — Linksmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2761684730989137546.post-78510719679997625002018-06-28T12:51:32.605-04:002018-06-28T12:51:32.605-04:00Fiscal space was narrowly defined as the room for ...<i>Fiscal space was narrowly defined as the room for undertaking discretionary fiscal policy relative to existing plans without endangering market access and debt sustainability. </i><br /><br />Under the Gold Standard it was not practical for citizens to use their Nation's (gold-backed) fiat to any large extent since eventually gold would become too expensive for any other use. Thus, central banks could not be allowed to provide checking accounts for all citizens but only for depository institutions (banks, credit unions, etc). Instead, the non-bank private sector would be largely confined to using bank deposits and not their Nation's fiat.<br /><br />The result is that the economy is unduly sensitive to fiscal spending not because of the new bank reserves created* but because the new deposits created in the banks, credit unions, etc. represent new interest to enable new credit/debt creation by the banks, etc.<br /><br />Thus if we wish the monetary sovereign to have MAXIMUM price inflation space then it follows that the price inflation space consumed by banks, credit unions, etc. be MINIMIZED. And who can argue that de-privileging the banks, etc. is not the proper way to do so since the excuse for those privileges, the Gold Standard, has been, rightly so, abandoned?<br /><br /><br />*Banks are not reserve limited in their lending but by the availability of new borrowers who can repay the loans with interest.Andrew Andersonhttps://www.blogger.com/profile/14296407661618321637noreply@blogger.com