tag:blogger.com,1999:blog-2277215496195926573.post5181689449719370290..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Randall Wray’s latest ideas on debt-free money.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2277215496195926573.post-8965195288097941872014-07-03T21:19:25.783-07:002014-07-03T21:19:25.783-07:00Good point. Yes, it would be possible I think to h...Good point. Yes, it would be possible I think to have full reserve while maintaining the existing distinction between monetary and fiscal policy: i.e. have government / treasuries / politicians responsible for fiscal, and central banks responsible for monetary which is the present set up.<br /><br />However, MMTers (of which Wray is one) tend to believe in merging monetary and fiscal policy: i.e. in a recession, they tend to say that the authorities should simply create new money and spend it, and/or cut taxes. And that “merge” inevitably involves some sort of committee deciding how much money to create and spend, while politicians still decide the strictly political stuff, like what proportion of GDP is allocated to public spending and how much of that goes on defence, education, etc. I’ve actually done a few blog posts on that merge:<br /><br />http://ralphanomics.blogspot.co.uk/2014/02/merging-monetary-and-fiscal-policy.html<br /><br />and<br /><br />http://ralphanomics.blogspot.co.uk/2013/03/mervyn-king-opposes-merging-fiscal-and.html<br /><br />Alternatively, in a merged system, one could have politicians making the decision that the latter committee makes, but that involves giving politicians access to the printing press. And we all know where that tends to lead to.<br /><br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-6656207625173805912014-07-03T18:18:23.695-07:002014-07-03T18:18:23.695-07:00Apologies for not being clear.
The issue is "...Apologies for not being clear. <br />The issue is "Do we need to change the institutional and political arrangements for determining and implementing macroeconomic policy?"<br />PM wants a new committee of experts. <br />I (and Wray?) are saying "if it ain't broke don't fix it".<br />Isn't Full Reserve banking possible with existing (or perhaps sightly modified) CB and government arrangements.<br />If so, is it wise to provoke a hornets' nest of objections by raising complex peripheral issues regarding committees and institutions?KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-25055663964871008542014-07-03T05:22:43.820-07:002014-07-03T05:22:43.820-07:00The simple statement that an existing system “may ...The simple statement that an existing system “may have imperfections but it does work” is a complete non-argument.<br /><br />The system for powering ocean going ships 200 years ago (i.e. sail) “did have imperfections but it did work”. Was that an argument for not replacing it with steam engines?<br /><br />“The case for Full Reserve banking does not depend on this issue.” What issue?<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-33679051170558534652014-07-03T05:08:38.690-07:002014-07-03T05:08:38.690-07:00The existing macro policy system may have imperfec...The existing macro policy system may have imperfections but it does work and It is very doubtful whether replacing it with a new Positive Money committee would be any better.<br />The case for Full Reserve banking does not depend on this issue. So it would be better to leave it aside.KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-82408259388282590452014-07-02T22:20:31.137-07:002014-07-02T22:20:31.137-07:00KK,
Thanks for your detailed thoughts. Re your po...KK,<br /><br />Thanks for your detailed thoughts. Re your point No.1, Wray seems to have shifted his ground. I got the impression he was flatly against anything resembling narrow banking or full reserve up to a few days ago. Now, as a result of the recent debate, he seems more favourable to the idea. But I may be wrong there.<br /><br />Re 2, and the “postal system” that essentially comes to the same thing as the money transfer system advocated by PM and other full reservers. Only difference is that everyone would have to set up a new account at the Post Office, whereas under PM’s system they can use their EXISTING bank. The latter strikes me as simpler for customers. In contrast, there isn't so much difference between Wray’s money transfer system and Milton Friedman’s or Laurence Kotlikoff’s full reserve systems. That is, both the latter involve everyone setting up new accounts.<br /><br />Re 3 and his claim that PM is “crank”, there is a very simple answer to insults: just return them. As you doubtless noticed I published a post a few days ago entitled “Randall Wray’s crank ideas on the Chicago Plan”.<br /><br />Re 4, you ask “Why do we need yet another committee”. The answer is: “We don’t”. That is, PM’s money creation committee would REPLACE existing central bank committees: it would not be in addition to CB committees. Moreover, in a country where there is a fiscal responsibility committee of some sort (as in the UK and US), PM’s committee would replace that as well. So on balance, that’s one LESS committee, not one more.<br /><br />Your final sentence asks what the point is of merging fiscal and monetary policy. It strikes me that the arguments for and against that merge are actually SEPARATE from the arguments for and against full reserve. However, PM are not the only lot in favour of that merge: most MMTers seem to be as well (and Wray is an MMTer). That is, MMTers tend to claim that in a recession, the authorities should simply create new money and spend it, and/or cut taxes. That proposal amounts to merging fiscal and monetary policy. I’ve actually written several blog posts in favour of the merge. E.g. see:<br /><br />http://ralphanomics.blogspot.co.uk/2014/02/merging-monetary-and-fiscal-policy.html<br /><br />http://ralphanomics.blogspot.co.uk/2013/03/mervyn-king-opposes-merging-fiscal-and.html<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-47087217004189377912014-07-02T18:32:55.582-07:002014-07-02T18:32:55.582-07:00Does it matter if money is "debt-free" o...Does it matter if money is "debt-free" or not? Maybe this is just semantics? <br /><br />For me the much more important part of Prof. Wray's new post is a few paragraphs near the start. Here he clarifies his position regarding Full Reserve/narrow banking. The biggest problem for Full Reserve banking advocates seems to be the strange views of Positive Money.<br /><br />Wray now says:<br />1. "I’m not against the narrow banking proposal, in general".<br />2. He prefers a Postal Saving System.<br />3. He regards Positive Money as a "crank", but is open to persuasion.<br />4. His main objection to Positive Money is the idea of "centralized committees headquartered at the thoroughly undemocratic and inflation-obsessed central banks."<br />Instead of centralized committees Wray likes "highly decentralized and mostly small, heavily regulated and supervised, community lenders making decisions over how much lending and whom to originate loans for".<br /><br />Positive Money's advocacy of a new centralized committee is thus the big stumbling block for Wray, and also for many others.<br /><br />There are already established procedures and committees which determine macroeconomic policy, including the fiscal policy. <br />There is no lack of "experts".<br />And the system is "democratic" in that the government is answerable to Parliament and thence to the electorate.<br />So why do we need yet another committee? <br />And why at the central bank of all places? The CB has an implementation and advisory role in monetary policy, but why extend this to fiscal policy?<br />KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.com