tag:blogger.com,1999:blog-2277215496195926573.post120352917161345600..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Frederick Soddy.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2277215496195926573.post-1197888110236498762012-03-15T06:05:35.263-07:002012-03-15T06:05:35.263-07:00my idea was that credit creation is MT,
even when ...my idea was that credit creation is MT,<br />even when government deficit spends without issuing bonds It is 'maturity mismatch' 'cause receivers of the funds don't pay taxes at that moment.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-89091816282683944052012-03-15T05:53:37.873-07:002012-03-15T05:53:37.873-07:00I must have misread him, he is talking about restr...I must have misread him, he is talking about restricting government under the Austrian proposals. So yeah, he is not talking about restricting the government spending under 100% reserve system. Here is his comment: <br />Dear Devin (and JKH and Scott)<br /> <br />If the point of the 100-percent reserve banking system is to reduce bank losses then I fail to see how it does that unless it prohibits credit creation at all. As soon as the bank starts making loans (even if the funds lent are fixed-term deposits already acquired) then credit risk is possible. Widespread failures (defaults) are still possible which just means that at some point in the future (when the fixed-term deposits expire) the “bank run” occurs.<br /> <br />In that sense, I don’t see the point of it and so I start thinking about the other motives that are behind the suggestion – the Austrian “sound money” motives – which in my view disable the capacity of the national government to pursue and achieve public purpose – full employment, equity in opportunity, environmentally sustainable growth, and price stability.<br /> <br />best wishes<br /> bill<br />http://bilbo.economicoutlook.net/blog/?p=7299Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-39642054600288984012012-03-15T04:55:44.401-07:002012-03-15T04:55:44.401-07:00Money4nothing, The statement that “the very nature...Money4nothing, The statement that “the very nature of credit creation is maturity transformation” is true in the sense that if one relaxes the rules governing MT, then banks will be able to lend more. But that’s not a brilliant idea if a side effect is worse bank fragility. A better option, as I’ve pointed out before on this site, is to leave the rules on MT untouched and expand the money supply where necessary. And personally I’d take that much further: more or less ban MT and make up that with a big money supply expansion.<br /><br />Re Bill Mitchell, I didn’t know he’d said much on MT. What’s the link? I couldn’t find anything by Googling.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-22509936216749936742012-03-14T16:13:26.182-07:002012-03-14T16:13:26.182-07:00imo the very nature of credit creation is maturity...imo the very nature of credit creation is maturity transormation to begin with. I just read Billy Blog about the topic and the comments over there. Bill tends to think that It restricts government. My question: under what institutional arrangments? I got the same question for you. <br />You tend to think that It makes the banking/ the whole financial system more stable. Credit risk remains. Bank runs are a liquidity problem, not a solvency problem and they can be eliminated totally by the central bank under functional regulations. But then again I don't know under what monetary regime you are advocating It.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-77611516453923554322012-03-14T14:40:01.025-07:002012-03-14T14:40:01.025-07:00Money4nothing, Good question. I hadn’t thought of ...Money4nothing, Good question. I hadn’t thought of that one. I think my answer is “just banks” because there are serious potential effects arising from banks doing maturity transformation: bank fragility, etc. In contrast, when businesses borrow, it’s normally in the form of bonds which take a year or two minimum before maturity is reached. So there is not so much “borrow short and invest long” going on there.<br /><br />But if a business DOES borrow by allowing all and sundry to open instant access accounts at the business, then it’s starting to act like a bank, and should obey the same rules as banks.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-65815573551639433322012-03-14T13:58:55.361-07:002012-03-14T13:58:55.361-07:00Do you think only banks have to banned from maturi...Do you think only banks have to banned from maturity mismatch or businesses too?Anonymousnoreply@blogger.com