tag:blogger.com,1999:blog-2277215496195926573.post34548070406717606..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Admati and Hellwig criticise full reserve / narrow banking.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2277215496195926573.post-52967924919119890702016-08-11T01:47:14.640-07:002016-08-11T01:47:14.640-07:00Yes, it’s an important point, but the net effect o...Yes, it’s an important point, but the net effect on demand will be zero (as both you and I suggest above) if government simply compensates by printing and spending enough money (and/or cutting taxes). In contrast, there would be a very definite net effect on the proportion of private sector investment funded out of each household and each firm’s own resources as compared to funding via borrowing. That is, under FR, interest rates are higher, but to compensate, each household and firm has a larger stock of money, and thus needs to borrow less.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-78053418522452181392016-08-10T13:45:33.661-07:002016-08-10T13:45:33.661-07:00"So what makes A&H think that most bank d..."So what makes A&H think that most bank depositors given the choice between the above safe but low interest option and the riskier but higher interest yielding option will mainly choose the first?"<br /><br />What work has been done on determining the extent to which people will choose the different options. Surely this is vital in determining the scale of the macro effects of FR which need to make up any coherent policy proposal on the subject.<br /><br />Will it be deflationary to the extent that the government can spend £100bn a year or printed money or would the effects be much weaker?-https://www.blogger.com/profile/05617000109355910830noreply@blogger.com