tag:blogger.com,1999:blog-2098432983500045934.post7718969265738456916..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: Yves is right: Don't dwell on the MonetarismThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-2098432983500045934.post-49776919483224952232014-11-05T22:31:04.549-05:002014-11-05T22:31:04.549-05:00Art, your plan has to have some basis in reality i...Art, your plan has to have some basis in reality if it is to be taken seriously. <br /><br />I'm not seeing the connection to anything real when you say "reduce the amount of debt that can be piled on top of each dollar of base".<br /><br />It doesn't look like any of the debt is piled on the monetary base to me.jimnoreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-59874631522452315212014-11-05T18:32:08.571-05:002014-11-05T18:32:08.571-05:00James,
Yves refers to a "banking expert"...James,<br /><br />Yves refers to a "banking expert". I refer to the website "Free Banking". Auburn Parks refers to "banks" a few times. <br /><br />And the only time the word "loans" appears is in your comment.<br /><br />My plan refers to <i>debt</i>, not bank loans. Did I mistakenly imply "bank loans" by referring to debt "piled on top" of base? Perhaps. But it wouldn't take much imagination to think that I might have been referring to debt <i>relative to</i> base... or even to debt relative to M1, the money that <i>ain't collecting interest</i>.<br /><br />If your argument is "<b>even if you succeed in curtailing bank loans, that still ignores the fact that most of the debt is not bank loans</b>" then apparently you have missed the point I have tried <a href="http://newarthurianeconomics.blogspot.com/2011/05/60-times.html" rel="nofollow">over</a> and <a href="http://newarthurianeconomics.blogspot.com/2013/10/handling-discrepancy.html" rel="nofollow">over</a> and <a href="http://newarthurianeconomics.blogspot.com/2014/03/ambsltcmdo-and-gdppot.html" rel="nofollow">over</a> to get across on this blog.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-87164440711559203252014-11-05T08:45:57.636-05:002014-11-05T08:45:57.636-05:00Art wrote "Here's my plan: Keep the Fed&#...Art wrote "Here's my plan: Keep the Fed's balance sheet big. But reduce the amount of debt that can be piled on top of each dollar of base."<br /><br />The flaw that I see with your plan is that the quantity of bank loans has little to do with the Fed's balance sheet.<br /><br />And even if you succeed in curtailing bank loans, that still ignores the fact that most of the debt is not bank loans. <br /><br />Currently the ratio of bank loans to the monetary base is about 2 to 1, and only 1 out of 8 dollars of all debt are bank loans. There is nothing in your plan to deal with most of the debt. <br /><br />http://research.stlouisfed.org/fred2/graph/?g=PVO<br /><br />Looking at the graph, the period (2001-2004), that the Fed is accused of providing banks with "easy money" is when bank lending fell to the lowest point ever in relation to all lending. That makes that story appear to be false.jimnoreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-73228922390327198342014-11-05T08:34:03.882-05:002014-11-05T08:34:03.882-05:00Art wrote "Here's my plan: Keep the Fed&#...Art wrote "Here's my plan: Keep the Fed's balance sheet big. But reduce the amount of debt that can be piled on top of each dollar of base."<br /><br />The flaw that I see with your plan is that the quantity of bank loans has little to do with the Fed's balance sheet.<br /><br />And even if you succeed in curtailing bank loans, that still ignores the fact that most of the debt is not bank loans. <br /><br />Currently the ratio of bank loans to the monetary base is about 2 to 1, and only 1 out of 8 dollars of all debt are bank loans. There is nothing in your plan to deal with most of the debt. <br /><br />http://research.stlouisfed.org/fred2/graph/?g=PVO<br /><br />Looking at the graph, the period (2001-2004), that the Fed is accused of providing banks with "easy money" is when bank lending fell to the lowest point ever in relation to all lending. That makes that story appear to be false.jimnoreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-6843264949662634142014-11-04T20:14:16.184-05:002014-11-04T20:14:16.184-05:001. get out of the box.
2. you completely missed t...1. get out of the box.<br /><br />2. you completely missed the point of the post. It's not about reserves. It's about everything else.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-1484755641983193852014-11-04T20:07:21.638-05:002014-11-04T20:07:21.638-05:00Art-
Seriously?
Did you really miss this?
"...Art-<br /><br />Seriously?<br /><br />Did you really miss this?<br /><br />"reserves do not and cannot get out into the economy (excluding the irrelevant amount of reserves that get withdrawn as cash)."<br /><br />So yes, I did include that before you made the statement.<br /><br />P.S. accounting errors are the number one reason why people (yourself included) get different macroeconomic concepts wrong.<br /><br />The reason I brought it up in the first place is because your entire post is about the effects of the reserve level. At the bottom of the post you even said this:<br /><br />"Then, assuming we get those reserves out into the economy, we have just as much money in the economy (relative to GDP) as we had before the crisis, so no inflation threat."<br /><br />Which is non-sensical. Reserves cannot and do not get out into the economy in any way that can have major economic impacts (because cash withdrawals are a negligible amount and not germane to the conversation).Anonymoushttps://www.blogger.com/profile/15433129947896088098noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-61165515491268765062014-11-04T19:24:01.434-05:002014-11-04T19:24:01.434-05:00Yeah, you have the order wrong. First you said &qu...Yeah, you have the order wrong. <i>First</i> you said "reserves do not and cannot get out into the economy" and <i>then</i> I said "Obviously reserves CAN get out into the economy." Somebody had to say it, because you said they CANNOT.<br /><br />That has nothing to do with what I am or am not worried about.<br /><br />ps, balance sheets are boring.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-37410415608233415422014-11-04T18:58:17.092-05:002014-11-04T18:58:17.092-05:00Art-
You said this:
"Obviously reserves CA...Art-<br /><br />You said this: <br /><br />"Obviously reserves CAN get out into the economy." <br /><br />in response to my comment:<br /><br />"reserves do not and cannot get out into the economy (excluding the irrelevant amount of reserves that get withdrawn as cash)"<br /><br />Your comment leads me to believe that you are worried about the possibility of a problematic amount of reserves "getting out" via cash withdrawals. <br /><br />As a reply to your belief I listed a number of reasons for why your worries are unfounded.Anonymoushttps://www.blogger.com/profile/15433129947896088098noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-52535351372439910622014-11-04T18:29:45.358-05:002014-11-04T18:29:45.358-05:00what are you talking about?what are you talking about?The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-18979373413047261112014-11-04T09:44:24.623-05:002014-11-04T09:44:24.623-05:00Umm, Art, I did include cash withdrawals specifica...Umm, Art, I did include cash withdrawals specifically in my comment:<br /><br />" (excluding the irrelevant amount of reserves that get withdrawn as cash)."<br /><br />But the number of dollar deposits in reserve accounts at the Fed has no bearing whatsoever on the public's desire to hold cash. <br /><br />If we did QE infinity and had no T-securities accounts outstanding, there would be $18 T in reserve accounts. Does that mean that you would personally hold alot more cash in your wallet or in a safe at your home? Maybe in a suit case? Or under your mattress?<br /><br />Of course not. Possessing lots of cash is a huge liability for people and businesses, which is of course why people dont hold alot of physical cash. The historical record is clear on this point.Anonymoushttps://www.blogger.com/profile/15433129947896088098noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-70320102916607279022014-11-04T03:10:34.818-05:002014-11-04T03:10:34.818-05:00Auburn: "reserves do not and cannot get out i...Auburn: "reserves do not and cannot get out into the economy (excluding the irrelevant amount of reserves that get withdrawn as cash)."<br /><br /><a href="http://newarthurianeconomics.blogspot.com/2014/10/an-interactive-inflation-experiment.html?showComment=1412941947421#c5854403382400078321" rel="nofollow">Jim</a>: "Before 2008 the monetary base consisted of mostly currency..."<br /><br />Obviously reserves CAN get out into the economy.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-4436413511887287442014-11-03T22:53:09.155-05:002014-11-03T22:53:09.155-05:00Oh and one more thing to remember Art.
reserves d...Oh and one more thing to remember Art.<br /><br />reserves do not and cannot get out into the economy (excluding the irrelevant amount of reserves that get withdrawn as cash). They exist only on the Feds balance sheet, and since only banks can have reserve accounts at the Fed, they can only be traded between banks.Anonymoushttps://www.blogger.com/profile/15433129947896088098noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-40260474255106638522014-11-03T14:49:27.137-05:002014-11-03T14:49:27.137-05:00SO much confusion is the product of misunderstandi...SO much confusion is the product of misunderstanding balance sheets. And thinking of the Fed's balance sheet as distinct and separate from the TSY's balance sheet.<br /><br />Even the T-securities are not technically listed as a Fed liability, all T-securities are accounts at the Fed. So the proper analysis requires us to use the Govt's balance sheet in total. And in this light, we see that QE does not change the Govt's balance sheet. <br /><br />Reserves and securities are both dollar deposits at the Fed, and QE cannot and does not change the number of dollar deposits at the Fed. Only fiscal policy (and Fed lending to member banks) can change the size of the Govt's balance sheet aka increase or decrease the number of dollar deposits at our national bank.Anonymoushttps://www.blogger.com/profile/15433129947896088098noreply@blogger.com