tag:blogger.com,1999:blog-2277215496195926573.post5837909014892934395..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Sixteen reasons why MMT is right on the fiscal versus monetary policy question.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2277215496195926573.post-5455310727763911702013-04-23T00:38:46.647-07:002013-04-23T00:38:46.647-07:00I’m using “fractional reserve” in the sense that t...I’m using “fractional reserve” in the sense that the reserves held by commercial banks are only a small “fraction” of their total assets or liabilities. I’m not using it in the sense that the central bank CONTROLS commercial bank balance sheets by adjusting the amount of reserves.<br /><br />The phrases “fractional reserve” and “full reserve” are unsatisfactory in that they give rise to the above sort of ambiguity and misunderstanding. In fact I heard recently that Positive Money is thinking of abandoning the phrase “full reserve” for this reason.<br /><br />Re your idea that governments never borrow to spend, as opposed to invest, I have doubts about that. There has been a very steep rise in government borrowing since the recent crisis. I haven’t noticed a vast increase in road, bridge, school or hospital building.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-90020072835447395392013-04-20T09:59:05.583-07:002013-04-20T09:59:05.583-07:00Since you are familiar with Mosler, then you know ...Since you are familiar with Mosler, then you know that there is no such thing as "fractional reserve banking", at least in the USA. Loans and deposits are created first, on balance sheets, and each bank's reserves are adjusted up or down approximately a month later, after a 2-week review of previous flows. Then only to hit the Fed's targets. Greenspan exempted all but household savings accounts from reserve requirements. Greenspan also added "sweeps" which borrow checking (demand deposits) for a few hours overnight for clearing.<br /><br />You should also know in the most pragmatic sense, government DO NOT borrow to spend. Borrowing is providing investments to savers. In the US, Congress forbids the Treasury from writing an overdraft at the Fed, as other banks can do. This includes when other banks wish to "lend" money to the Govt they can do so by issuing a payment to Tsy with funds they don't have in their reserves. They can borrow that overdraft from the Fed. Congress also forbids the Fed from purchasing T-securities at auctions or directly. Therefore, Treasury must sell Bonds to designated private banks for cash in their accounts, which then turn around and sell Bonds to the Fed, for cash, or to other banks that wish to buy T-securities, including foreign central banks that want T-securities rather than Dollars.<br /><br />There's some convoluted assets swaps going on, but basically the Treasury *is* borrowing from the Fed, only indirectly with layers of middlemen and handouts to the banking system and to foreign central banks.<br /><br />That's not the same as "borrowing instead of using power to create money". That's corporate welfare to the Rich, to banks and to net savers.<br /><br />I believe this was developed as a "workaround" to the US Constitution, which says Treasury can (a) coin money (b) issue bonds aka debt. Without a Constitutional amendment to clarify, if Treasury just started printing money (say, to fund WW One), the govt would have been sued by private banks. Instead, they designed a system within the Fed Res Act so the Govt could "borrow" from it's own big fat Govt Bank, and cut the privileged banks in on the deal.dilbertgeghttps://www.blogger.com/profile/09789262821187351034noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-76065544385223550712012-03-14T01:31:15.641-07:002012-03-14T01:31:15.641-07:00Farmland investing, To be cynical, the reason why ...Farmland investing, To be cynical, the reason why central banks and academic economists don’t favour “creating new money and then push it out into the real economy” is that they think they can do better by splitting stimulus up into its monetary and fiscal components. So we have a credit crunch caused by excessive and irresponsible borrowing, and the authorities try to remedy the situation by cutting interest rates and implementing QE so as to encourage more borrowing!!!!<br /><br />They aren’t just wrong: they’re barking mad. Or perhaps that’s too cynical.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-15720829870075230192012-03-13T15:08:57.123-07:002012-03-13T15:08:57.123-07:00I like the initial description of Abba Lerner'...I like the initial description of Abba Lerner's description of MMT. I have often wondered why governments do indeed simply not create new money and then push it out into the real economy. QE doesn't do this.farmland investinghttp://www.greenworldbvi.com/alternative-investments-options/agricultural-farmland/noreply@blogger.com