Debt and Equity

Like touching a snake

My friend Aquinum has written:

"Possessing physical dollars is like having equity in the economic output of the United States of America, and has no credit risk associated to it.... To summarize: physical paper money is equity. Bank deposit money is backed by debt...."

Paper money is equity. This is an astounding observation. Aquinum refers me to Unqualified Reservations for a technical definition of money-as-equity:

Any financial instrument is one of three things: a deed of ownership of some good (a title), a liability to fulfill some obligation, possibly contingent (a debt or option), or none of the above (equity). The dollar is equity....

The $787B Stimulus

A Context for Obama's $787,000,000,000.00 Stimulus Package

In the June 10, 1934 edition of The New York Times there appeared an article by John Maynard Keynes. Keynes wrote in part:

• "For six months at least, and probably a year, the measure of recovery to be achieved will mainly depend on the degree of the direct stimulus to production deliberately applied by the administration."
• "The aggregate emergency expenditure is now declining. If it is going to decline to $200,000,000 [$200 million] monthly, much of the ground already gained will probably be lost. If it were to rise to $400,000,000 [$400 million] monthly, I should be quite confident that a strong business revival would set in by the Autumn."
• "Four hundred million dollars monthly is not much more than 11 per cent of the national income...."

I don't know how Keynes came up with his $400 million figure. But it is easy enough to scale his number up to fit the current national income.