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Arabica Robusta

Essays in Monetary Theory and Policy: On the Nature of Money | New Economic Perspectives - 0 views

neweconomicperspectives.org/...heory-policy-nature-money.html

money theory economics

shared by Arabica Robusta on 12 Jan 14 - No Cached
  • Observe that the need for a standardized money of account was not necessary since the redemption of debt between individuals can be determined case by case.  Money of account might be a cattle between Joshua and Henry, and then ten watermelons between Helen and Linda, etc.  However, when there emerges the need to denominate debt obligation between individuals and the “society”/central authority in various forms (such as fines, fees, taxes, etc.), a standard unit of account for money was needed to serve as the standard measure of value. 
  • In his study of colonial Africa, Forstater similarly concludes that by imposing a debt obligation (taxes) on colonial Africans denominated in foreign currency (British Pounds), the British were able to dismantle the pre-existing economic structure in Africa and to monetize its whole economy and population (2005). 
  • While Hudson (2004) in his study of Mesopotamia offers the second explanation of the origin of money that money evolved as a standard accounting unit that keeps track of surplus and inputs of production, the two heterodox explanations need not be mutually exclusive (Tcherneva, 2005).  Henry links both explanations in his study of ancient Egypt.  In essence, Henry argues that: 1) money originated in ancient Egypt from the need of the ruling “engineers” class to establish accounting basis for agricultural products and social surpluses; and 2) money also served as a means of payment to settle debt obligations (fines, fees, foreign tribute, and tribal obligations) to the kings and priests (Henry, 2004).
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  • Since money is a veil that hides the urge to truck and barter, removing it would not affect production except for some efficiency costs due to the “double coincidence of wants” problem.  Therefore, money is a neutral veil that only obscures the market relationships behind it.  Economists thus ought to conduct a “real”, as opposed to “monetary,” analysis.
  • What is important for the paper is that the above analysis shows how intrinsically connected are the ideas of barter, money neutrality, “real” economic analysis, “exogenous money,” inflation, money scarcity, and “loanable funds theory.”  These theoretical tools then allow the orthodox economists to conduct “correct” monetary and fiscal policies.  To recapitulate, monetary policy determines price levels while fiscal policy negatively affects private investment.  Hence, the solution is to target a stable money supply and to run balanced government budget as long as possible.  It is therefore that the myth of barter is crucial in the orthodox theorizing. 
  • First, these research shows that money existed prior to market.  
  • Second, the nature of money is a credit-debt relationship that can only be understood in institutional and social contexts.
  • The liability of the central authority becomes the standard unit of account because the central authority has the sufficient power to impose liabilities on its population in the forms of fines and taxes.  This is the essence of Chartalism, “Modern Money,” “Tax-Driven Money,” and “Money as a Creature of the State” (Lerner 1947, Knapp 1973, Keynes 1930, Goodhart 1998, Wray 2001, Forstater 2006).
  • Third, the role of money was initially an abstract unit of account and means of final payment and later as medium of exchange.  This means that money as unit of account precedes its roles as medium of exchange and store of value. 
  • Therefore, money originated as a byproduct of social relations based on debt and realized its standard form through the need of the central authority, as opposed to private individuals, to establish a standard unit of account to measure debt obligations or production surplus.  Our analysis also implies a hierarchy of money (debt pyramid), with the liability of the state sits on the top and the liability of individuals sits on the bottom (Bell, 2001).  It should be clear that the entire debt pyramid is effectively money/IOUs.
  • In short, the endogenous money approach reverses two causalities proposed by orthodoxy: 1) reserve creates deposits; and 2) deposits create loan.  On the contrary, the endogenous money holds that loans create deposits that then create the need for the central bank to accommodate with reserve.  In other words, banks first make loans, and then seek reserves to meet central bank regulations. 
  • Such debt obligation is ultimately reflected at the central bank’s balance sheet as the private bank enables Henry’s IOUs to be denominated in the state money of account.  Therefore, the central bank is simply a scorekeeper of the economy (Mosler, 2010).  The reserves at the central bank, created by keystrokes, simply serve an accounting purpose for the economy. 
  • It is important to note that bond sales do not finance government spending.  Reserves and bonds are both the liability of the state.  The only difference is that bonds earn interests while reserves do not.  This also means that the myth of the national debt indebting our future generation should be abolished.  Government liabilities, including reserves and government bonds, are effectively private wealth by accounting identity. 
  • But the paper argues that before reaching full employment, it is unlikely that deficit spending would necessarily be inflationary.  In essence, involuntary unemployment indicates a permanent loss in production since the federal government could always have hired the unemployed to achieve public purposes.  Hence, the right to employment ought to become a basic human right guaranteed by any sovereign government.
  • Even with the quantitative easing, the central bank is merely performing asset management as opposed to money creation.  Indeed, the heterodox theory of the nature of money implies that money creation has to be endogenous, which gives support for conducting expansionary fiscal policy till full employment.
Arabica Robusta

The Ways of the World | Socialist Review - 0 views

socialistreview.org.uk/...ways-world

harvey neoliberalism marxism geography

shared by Arabica Robusta on 26 Jun 16 - No Cached
  • The section on environmentalism is also relevant to current debates. Harvey rejects the idea of some timeless form of “nature” that stands outside of human society and interaction. There is also a vigorous critique of the idea of placing monetary values on natural phenomena.
  • On the centenary of the commune in 1971 the site was occupied by demonstrators in memory of the thousands who were murdered when it was suppressed.
Arabica Robusta

How America Became an Oligarchy » CounterPunch: Tells the Facts, Names the Names - 0 views

www.counterpunch.org/...ow-america-became-an-oligarchy

exploitation finance monetary neoliberalism banking

shared by Arabica Robusta on 12 Apr 15 - No Cached
  • The freedom to vote carries little weight without economic freedom – the freedom to work and to have food, shelter, education, medical care and a decent retirement. President Franklin Roosevelt maintained that we need an Economic Bill of Rights. If our elected representatives were not beholden to the moneylenders, they might be able both to pass such a bill and to come up with the money to fund it.
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