tag:blogger.com,1999:blog-5908830827135060852.post7563783856499032957..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: Money-Financed Fiscal Stimulus: Nothing To Do With "Money"Brian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-5908830827135060852.post-72219378473892620992017-04-28T03:46:52.922-04:002017-04-28T03:46:52.922-04:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/13710423502046971644noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-1283123657239681492016-11-09T05:59:45.390-05:002016-11-09T05:59:45.390-05:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/17613583875535931324noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-2413364047434269192016-11-04T10:47:44.790-04:002016-11-04T10:47:44.790-04:00They can set the rate of interest on all of their ...They can set the rate of interest on all of their liabilities, as long as the currency is non-convertible. The issue is that they want to set the policy rate to control inflation, and they let bond yields float to create a yield curve. (And when places like Australia threatened to retire their bonds, the various free-market loving, fiscal disciplinarians in the financial sector screamed bloody murder to keep their yield curve.) In other words, the government *wants* to pay interest for policy reasons. So the rhetorical question is: why is 0% financing an advantage?<br /><br />If you get deported after Wednesday, I might be seeing you fairly soon!Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-14478537108526216812016-11-04T09:16:38.149-04:002016-11-04T09:16:38.149-04:00"but I just wanted to point out we can build ..."but I just wanted to point out we can build models without worrying about the nature of money."<br /><br />YES! Way to not get sucked into essentialism.<br /><br />I know you don't like to put money in formal models. I don't have a dog in that fight, in part because I am not well enough informed. You surpassed me a while ago, Brian.<br /><br />But what a waste of time enquiring into the "nature" of money would be. Money is a flower. No, money is a manifestation of love! No, money is an inside asset, which REALLY helps in the understanding.<br /><br />By the way, I share your take on what people call helicopter money. It seems like macroeconomists can be even more fraudulent than banksters or politicians. Some of their claims on this issue were pretty darn dishonest, rather than just wrong.<br /><br />Back to money, as I see it, the government has -- for whatever reason -- a unique ability to create zero-interest-bearing liabilities. You could call that an asset if you wanted. One of the functions of the central bank is to realize, dare I say, monetize this advantage. You can call the stuff they issue as part of that process liabilities if you want. But who cares about the words?<br /><br />Sorry for double posting. There was a typo. And then it got longer! Maybe I'll see you around after Wednesday. Hope not, but maybe.Anonymoushttps://www.blogger.com/profile/16179991031652560935noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-88016208446536407372016-11-04T09:00:36.733-04:002016-11-04T09:00:36.733-04:00This comment has been removed by the author.Anonymoushttps://www.blogger.com/profile/16179991031652560935noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-19974602217667877752016-10-27T06:36:03.471-04:002016-10-27T06:36:03.471-04:00My wording was vague, but yes, not all MMT authors...My wording was vague, but yes, not all MMT authors advocate the permanent ZIRP policy. However, Bill Mitchell does use "overt monetary financing" to refer to the policy, while more mainstream economists allow for non-zero interest rates. Although both groups use the same term, I see the policies as being very distinct.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-8011826340604408352016-10-27T01:32:03.425-04:002016-10-27T01:32:03.425-04:00Overt monetary financing is surely not necessarily...Overt monetary financing is surely not necessarily ZIRP. The policy interest rate could be at any level. It is just that the policy interest rate becomes and remains the floor rate the central bank pays on exchange settlement balances. It is not a requirement of MMT that the official interest rate is set at zero, even though this is often advocated by MMT authors.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-13711334993339921832016-10-25T10:08:43.010-04:002016-10-25T10:08:43.010-04:00The idea of it being "permanent" pretty ...The idea of it being "permanent" pretty much relies on money being exogenous, which isn't a feature of many models currently in use. Even if one believes that money demand is stable, a "permanent" increase in "money" is just "permanently lower interest rates", and that is the thing that is driving model outcomes.<br /><br />Since it is mainstream economists who usually talk about things like "permanent increases in the money supply," and then they ignore post-Keynesianism because it is "too verbal" and "there are not models", I just shake my head.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-38366900131050058912016-10-25T08:43:27.642-04:002016-10-25T08:43:27.642-04:00Most of the technical arguments made as to why mon...Most of the technical arguments made as to why money financing might be more effective than debt financing, even at the ZLB, rely on the idea of a permanent difference. If it assumed that the finance mix reverts to the same blend after a certain period of time, then the supposed benefits of money financing disappear.<br /><br />But, it's hard to see how you can take a permanent measure in the real world, as opposed to in models. The monetary authority today cannot bind the monetary authority tomorrow. Long run policy must be viewed as endogenous. You have to ask whether the funding mix today will somehow change what the authorities decide to do in the future. <br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-58762382508840799022016-10-24T17:07:37.533-04:002016-10-24T17:07:37.533-04:00I agree with all of this. (Including the snarky as...I agree with all of this. (Including the snarky asides.)JW Masonhttps://www.blogger.com/profile/14979669866721105903noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-44692509126686988272016-10-23T17:34:59.213-04:002016-10-23T17:34:59.213-04:00A gift certificate is a liability to the issuer, l...A gift certificate is a liability to the issuer, like money. (One difference is that gift certificates have an expiry date, whereas most government money does not. "Stamped money" sort of does.)<br /><br />To paraphrase Minsky, anyone can issue a liability and hope it is treated as "money". Whether or not it is depend on economic institutions in place. <br /><br />I will be writing an introduction on my SFC models package later this week (probably Wednesday). I have deliberately left "money" out of the package; all entities have a financial asset holding ("F") which may be held in whatever instruments are in the model. I am leaving the financial side of things on the back burner for now, but I just wanted to point out we can build models without worrying about the nature of money.<br /><br />Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-17026013558871838612016-10-23T11:05:08.423-04:002016-10-23T11:05:08.423-04:00Brian,
It seems to me that a new framework is nee...Brian,<br /><br />It seems to me that a new framework is needed. One potential new framework compares "money" to a gift certificate. I made an opening stab at this with the post <a href="http://mechanicalmoney.blogspot.com/2016/09/money-is-like-national-gift-certificate.html" rel="nofollow"> "Money is Like a National Gift Certificate". </a><br /><br />Now if we applied this model to either SFC or DSGE models, gift certificates could easily be traded value-for-value where supply always equals demand. A discontinuity comes from the creation of the gift certificate, which can originate from two sources.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.com