JKH — Helicopter Recall – Fiscal Repairs Needed

The true role of accounting is fundamental to understanding these distinctions. Accounting reflects operations and operations reflect policy. If a central bank undertakes a fiscal expenditure operation, it will deliberately blow a hole in its balance sheet and create a negative capital position and a mismatched balance sheet. This activity is obviously not legitimate as a delegated responsibility for central banks. It is a usurpation of fiscal responsibility that produces a corresponding deformation of the central bank balance sheet. Accounting reflects operations and operations reflect policy. This is policy hijacking.…

Monetary Realism
Helicopter Recall – Fiscal Repairs Needed

JKH

Eric Tymoigne — Money and Banking – Part 6

This post concludes our study of central banking matters (there would be a lot more to cover…maybe another time). The post studies how the Fed is involved in fiscal operations and how the U.S. Treasury is involved in monetary-policy operations. The extensive interaction between these two branches of the U.S. government is necessary for fiscal and monetary policies to work properly.…

I am taking a 3-week break to take care of other things with upcoming deadlines. Next is private banks, followed by financial crises, inflation and growth, and finally issues surrounding the nature and history of money. There is probably another six/seven posts worth of material.

New Economic Perspectives
Money and Banking – Part 6
Eric Tymoigne | Associate Professor of Economics at Lewis and Clark College, Portland, Oregon; and Research Associate at the Levy Economics Institute of Bard College

Bill Mitchell — lightweight garbage from The Economist

Bill initially smacks down The Economist as a propaganda rag, but the rest of the article is an excellent primer on PQE and the difference between QE and the misnamed  PQE. QE is a monetary operation and PQE is a fiscal operation.

The differences are (see PQE is sound economics but is not in the QE family:

1. QE does not change the net financial asset position of the non-government sector at all – that is, the net wealth remains unchanged. It is an asset swap. The non-government sector just rearranges is wealth portfolio – more cash, less bonds. No net change.
That is the essence of a – monetary policy operation – which alters the liquidity in the economy. It does it by portfolio swaps and in doing so influences the interest rates and the term structure.

2. PQE (or OMF) means the central bank, as one part of the consolidated government sector, the other being the Treasury, would use the currency-issuing capacity of the government to facilitate the purchase of real goods and services to build productive infrastructure.

The NIB [National Investment Bank] is just a fancy title for a government agency and would be engaged in public spending – that is, in a fiscal operation. It would be spending out of some account the Bank of England created on its behalf and filled with numbers, presumably with many zeros after the first few digits.

PQE is not QE because it is a fiscal operation, which means it would increase the net financial assets in the non-government sector because it would increase national income (via spending on infrastructure).

PQE as envisaged is a fiscal operation, not a monetary operation, whereas QE as practiced by the Bank of England, the Federal Reserve Bank of America, the Bank of Japan etc are not fiscal operations.

Bill Mitchell – billy blog
lightweight garbage from The EconomistBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Brian Romanchuk — The Debate Over The Purpose Of Taxation

Garth Brazelton's article "The Purpose of Taxation" discusses the purpose of taxation, and this has generated a fair number of comments on the Mike Norman MMT website. His article discusses government finance from the point of view of Functional Finance. In this article, I want to give a high level discussion of the controversy around the Functional Finance viewpoint on the role of government taxes.

Bond Economics

The Debate Over The Purpose Of Taxation
Brian Romanchuk

Will This Help? "Fed's Rosengren blasts US government spending cuts"

Commentary by Roger Erickson

He's still talking like a Deficit Dove, but even that helps for the moment.

Increased spending cuts and tax increases in the United States have weakened the country’s outlook for near-term economic growth, and heightened the risk that inflation expectations could fall and real interest rates could rise, according to Boston Federal Reserve chief executive Eric Rosengren.

“A long-term sustainable solution for fiscal balance is absolutely in the country’s interest. But timing is an issue, ...”

When will financial people catch on that "fiscal balance" - i.e., balanced fiat - is a meaningless phrase in real fiscal operations?  The whole purpose of fiscal operations is to balance conditions risking national growth with those risking national contraction.

The Economist — Platinomics

Must-read. The cat is out of the bag. TPC has done its job. The explanation is now in the mainstream. No economist or financial professional can read this and not get it. This is a really succinct and clever account that cuts to the chase. The last mile is really closing fast.

The Economist | Free Exchange
Platinomics
G. I. | Washington
(h/t y in the comments)

Michael Sankowski — The Trillion Dollar Coin and the Debt Ceiling

beowulf is the person responsible for this idea which now has 340,000 entries in Google and it’s very own place in Wikipedia!

Way to go, beowulf!

Read it at Modern Monetary Realism
The Trillion Dollar Coin and the Debt Ceiling

by Michael Sankowski

Once again, the difference between monetary and fiscal

If for example your daughter was very sick and needed an expensive surgery that the $50,000 would cover this exacerbates things by another major factor in favor of the check -from the stand point of your own personal welfare.

If we have another Katrina like event where would assistance be more beneficial if we need $100 billion dollars to fully deal with the crisis? Would it be better to have the Fed buy $100 billion in T-bills or send it to the state the disaster occurred at giving the money to the fire department and the Red Cross.

Read it at Diary of a Republican Hater
MM vs. Krugman vs. MMT: Political and Definitional Debate?

by Mike Sax

A fiscal transfer injects net financial assets into domestic private sector. The Fed is not empowered to make fiscal transfers.

Purchase and sale of tsys by the Fed alters the composition and term of non-government net financial assets without affecting the amount.