…..I recently had a conversation with somebody who told me he believed in ‘fiscal austerity plus monetary easing’. He defined ‘monetary easing’ as ‘increasing the money supply’. Thus his idea appears to be a version of something over which there has been a lot of fussing in certain circles. Roughly: rather than pursuing fiscal stimulus by having the treasury run a deficit, why not have the central bank just ‘create money’ and give it out to people? Increase ‘the money supply’ rather than the deficit.
People who like this policy say that it would work as an economic stimulus. People who don’t like it say that it would be inflationary. Neither think very carefully about what they mean.
What does it mean for the central bank to ‘create money’? The central bank can, of course, credit the reserve accounts of banks, usually by lending against collateral. But this only increases the money(r) supply. Money(d) is the money that people actually spend; reserves cycle around in interbank settlements. So if we’re talking about something that could either work as economic stimulus or drive inflation, we must be talking about increasing the money(d) supply – say by crediting people’s bank accounts.
How can the central bank increase bank deposits? The only way to directly increase net bank deposits is to borrow from a bank. With a few legal adjustments, the central bank could do this. It could instruct banks to credit accounts up by a certain amount and then credit up their reserve accounts by a corresponding amount without taking any collateral. Very fancy, but remember that reserves are just liabilities of the central bank. So this operation actually amounts to the central bank taking out loans from the banks and then putting the new deposits into people’s accounts.
Don’t forget, either, that reserves are (in most countries at least) nominally backed by government debt. So the end result of the above-described operation is the same, in terms of the portfolio adjustments, as that of a fiscal deficit…….
- Poola Solidaarsus protestib Junckeri vastu
- Money is Created Out of Nothing (Ben Bernake, Chairman of the Federal Reserve)
- A Brief History Of Modern Money Theory
- Modern Monetary Theory: Snake Oil of the 21st Century
- The Prophets and Promise of Classical Capitalism The Age of Uncertainty John Kenneth Galbraith
- SUCH A RADICAL
- Hey hey, ho ho… ‘free trade agreements’ got to go!
- Trumpistid teevad revolutsiooni
- Püüdke natse, natsism on probleem nr. 1 Ameerikas
- The European Union, the New European Soviet?
- Trump ja Bannon
- California põllumajandus ja minu muru
- Brexit Boost: Hiring and Salaries Rise as Supply of Cheap Foreign Workers Falls
- Global Inflation Hits Lowest Level Since 2009
- Modern Money and the Constitution by Professor Christine Desan
- Kiidan heaks Trumpi immigratsioonipoliitika
- Hello Angry Losers
Seda blogi vaadatud (60 sek hilinemine)
- 199,270 korda