Winterspeak — Ask a banker, and listen to what they say!

Nice post on Planet Money which actually gets many of the facts right! Unfortunately, they do not see how these facts actually pull together, and so do not quite capture the core insight into bank operations. But overall, it's a nice piece.

Winterspeak
Ask a banker, and listen to what they say!

Andrew Lainton — The Equity Residue in Bank Deposits

A short note in reply to @Frances_Coppola. She disagreed with a paper from Jan Kregal at Levy.

Kregal argues that there are two types of deposit, deposits of currency and coin, and deposits created when loans are made. If a bank makes bad loan

“it is the failure of the holder of the second type of deposit [loan-created deposits] to redeem its liability that is the major cause of bank failure”

so the first type of depositor (of currency and coin) should not bear the brunt of these bad decisions.

Coppola disagrees with this on a theoretical point via twitter.

Decisions, Decisions, Decisions
The Equity Residue in Bank Deposits
Andrew Lainton

Izabella Kaminska — Corporate currencies are equity

Climateer linked to a post by Phil Pearlman here which pondered the merits of Google launching its own currency.

The logic is basically that Google, being an experimental tech company is in a better position to launch a private currency than a bunch of anonymous coders.

But the piece misses a fundamental point. Google already has a currency in issuance. That currency is Google equity.

When you swap national currency for an investment in a particular corporate stock you are effectively swapping an investment in the general wealth of the country, which is taxable by the state, for concentrated exposure to a particular corporate (i.e one very small segment of that economy). You are doing that because you think that stock will outperform the general performance of the country.

That corporate then ends up holding your dollars like central banks of foreign countries hold foreign reserves. The corporate — just like foreign central banks — can choose to invest those reserves in dollar denominated securities and basically receive dollar interest (aka Paypal) in which case its currency is effectively pegged to the dollar, or it can spend (invest) those reserves on tools, infrastructure, know-how and resources that allow it to deliver ever more value/output/return to holders of its equity....

Dizzynomics

Corporate currencies are equity

Izabella Kaminska

Chris Cook — The Myth of Debt

This was reposted at New Economic Perspectives and Clonal called attention to it here n the comments. Appended here are comments on FaceBook.

Herald Scotland
The Myth of Debt
Chris Cook | senior research fellow at University College London and a former director at the International Petroleum Exchange

From FB — MMT, Heterodox and Dissident Economics



Umkc Economists: I really like this piece, Chris. Confused as to the reference to the currency board arrangement in HK. It may leave readers with the impression that fixed exchange rates are the preferred arrangement for ensuring discipline wrt money creation.






Chris Cook: That would have been better taken out.


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Warren Mosler: good article thanks!!! you might add that 'paying it back' is just a matter of debiting one account at the boe and crediting another, both denominated in pounds. so both are 'the money' the difference being a time deposit vs an overnight deposit.






Warren Mosler: the mainstream implies that when you 'buy the debt' the state is 'taking your money' as if you come home and tell your wife you had a very bad day, you moved 1 million from checking to savings and so lost 1 million.


Winterspeak — The Myth of High Powered Money

Does the government fiscal deficit flow to savings or equity? Winterspeak says equity and denotes this as NFA (e).

There is already a spirited debate raging in the comments.

Read it at Winterspeak.com
The Myth of High Powered Money
by Winterspeak