tag:blogger.com,1999:blog-2098432983500045934.post7997072703540739487..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: Steve Keen, exactly rightThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2098432983500045934.post-74042275309078241962015-01-17T07:49:27.173-05:002015-01-17T07:49:27.173-05:00Geerussell wrote: "If that's accurate, th...Geerussell wrote: "If that's accurate, then it's difficult to see how the suggested remedy of the Fed purchasing federal debt changes anything ."<br /><br />To Geerussel: If Fed purchases of Govt securities has no effect on money supply, then please explain how come bank deposits have grown by $3 trillion more than deposits in the last 6 years. <br />http://research.stlouisfed.org/fred2/graph/?g=Xqc<br /><br />To Art:<br />It is easy enough for govt policy to discourage bank lending. But there is no evidence that will reduce private debt. The US household sector holds about $70 trillion in financial assets. And many of those asset holders want to lend out that money for purposes of financial gain. Driving lending out of the regulated lending channels will only drive it into the shadows where more unstable debt arrangements are created.<br /><br />That should have been the lesson learned from the 2008 financial crises. Instead a massive disinformation campaign by Wall Street has got many people to conclude the exact opposite.jimnoreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-39397249702823566812015-01-17T05:25:52.609-05:002015-01-17T05:25:52.609-05:00Auburn Parks: "It seems that you've ackno...Auburn Parks: "It seems that you've acknowledged that a decrease in the money supply correlates with decreased economic activity."<br /><br />I am also looking at the <i>cost</i> of the money supply, something no one else appears to have noticed.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-87376564723553545522015-01-17T05:18:11.727-05:002015-01-17T05:18:11.727-05:00Geerussell: "I'm assuming an implicit pri...Geerussell: "I'm assuming an implicit private sector point of view, costly <i>for the private sector</i> ..."<br /><br />Not necessarily. When the Fed buys Federal debt, the cost of that debt goes almost to zero, because the Fed turns the interest over to the Treasury, about 95% of the interest last I looked.<br /><br />Anyway, there is not much difference between "costly for the private sector" and "costly for the economy as a whole". <br /><br />Geerussell: "... Money (held as an asset by the private sector) that does not cost interest (for the private sector) and need not be repaid (by the private sector). Which would make this equivalent to net govt liabilities (inclusive of federal debt, notes, coins and reserves) held by the private sector."<br /><br />Yeah, that is pretty much what I was talking about (except for the 95%-of-interest thing).<br /><br />But when <i>you</i> say it, it is as if there is no private debt at all. I was saying "We must reduce private debt because it creates a financial cost" but there is no hint of that in your words.<br /><br />Most of the money created by the creation of private-sector debt, most of it also is "held as an asset by the private sector". But very little of that money participates in non-financial transactions where people receive income and then can use it to pay down debt. That right there is the problem in a nutshell, but (again) there is no hint of it in your words.<br /><br />Geerussell: "If that's accurate, then it's difficult to see how the suggested remedy of the Fed purchasing federal debt changes anything as it's just a swap of instruments in same category of does not cost interest and need not be repaid for the private sector."<br /><br />A. The Federal government deficit spends.<br /><br />B. It sells some debt to cover the deficit.<br /><br />C, The Federal Reserve buys some debt.<br /><br />D. The Federal Reserve receives interest on that debt.<br /><br />E. The Federal Reserve turns the money over to the Treasury.<br /><br />The inane "swap of instruments" story seems to focus entirely on step C. (Why it leaves out step B, I cannot understand!) <br /><br />You say "it's difficult to see" how step C changes anything. But clearly things are changed by steps D and E, which follow inexorably from C.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-50409517686972517722015-01-16T10:38:27.595-05:002015-01-16T10:38:27.595-05:00Let the Federal government spend, if need be, and ...<i> Let the Federal government spend, if need be, and see to it that the Federal Reserve buys up enough Federal debt to push up the amount of low-cost money in our economy, to bring down the ratio of "costly money" or "credit in use" or "debt", relative to money that does not cost interest and need not be repaid. </i><br /><br />I feel the urge to unpack that last part to see if I understand what's being specified.<br /><br />We have the idea of costly money that needs to be repaid. I'm assuming an implicit private sector point of view, costly <i>for the private sector</i> and needs to be repaid <i>by the private sector</i> making this label effectively interchangeable with private debt.<br /><br />Then there's money that does not cost interest and need not be repaid. Here too I'm assuming an implicit private sector point of view. Money (held as an asset by the private sector) that does not cost interest (for the private sector) and need not be repaid (by the private sector). Which would make this equivalent to <i>net</i> govt liabilities (inclusive of federal debt, notes, coins and reserves) held by the private sector.<br /><br />Are those assumptions correct or am I missing something?<br /><br />If that's accurate, then it's difficult to see how the suggested remedy of the Fed purchasing federal debt changes anything as it's just a swap of instruments in same category of does not cost interest and need not be repaid for the private sector.<br />geerussellhttps://www.blogger.com/profile/10631984593634015839noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-44648974927660639872015-01-16T09:56:06.702-05:002015-01-16T09:56:06.702-05:00Art-
I dont understand. It seems that you've ...Art-<br /><br />I dont understand. It seems that you've acknowledged that a decrease in the money supply correlates with decreased economic activity. <br /><br />How do you propose that we reduce the private sector's money supply and yet avoid a downturn without an increase in Govt supplied money?Anonymoushttps://www.blogger.com/profile/15433129947896088098noreply@blogger.com