tag:blogger.com,1999:blog-6704573462403312459.post1017783929241544084..comments2024-03-29T02:53:03.321-04:00Comments on Moneyness: Is fiat money to blame for the Iraq war, police brutality, and the war on drugs?JP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-6704573462403312459.post-18318334756565262052020-07-10T12:27:16.609-04:002020-07-10T12:27:16.609-04:00Good point. I discussed this briefly in the asteri...Good point. I discussed this briefly in the asterisk at the bottom of the post. Going back to the 1950s, regular banknote-based seigniorage seems to be in the range of 1-2%.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-5796756313932069042020-07-09T10:59:26.166-04:002020-07-09T10:59:26.166-04:00I think there are some questions about this post. ...I think there are some questions about this post. At the beginning of 2009 the Federal Reserve had $826 billion in currency in public circulation and by the end of 2019 that amount had increased to $1,719 billion for an increase of $893 over those 11 years. During that period the Fed's securities held outright increased from $496 billion on 1/1/09 to $3,738 billion at the end of 2019 for a total increase of $3,242 billion.<br /><br />Most of the increase in the Fed's securities held outright were the result of the 2008-2009 market intervention programs and the follow on QE1,QE2, and QE3 programs. It looks like over 70% of what you call seigniorage has nothing to do with currency issued by the Fed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-46254914022700386562020-07-05T07:55:48.478-04:002020-07-05T07:55:48.478-04:00I'd like to add an anecdote: when the central ...I'd like to add an anecdote: when the central bank pulls a currency out of circulation, it records the full value of the currency that isn't returned to it by the cut off date. This could be a nice way to raise seniorage income from lost coins and banknotes, regardless of the interest rate.Itayhttp://www.shulit.com/noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-85588691384807009372020-07-01T06:11:22.782-04:002020-07-01T06:11:22.782-04:00Yes, but the logarithmic scale allows to see if th...Yes, but the logarithmic scale allows to see if the growth rate has increased or not. But my point is about the level of debt. If a country (not the US, because the exorbitant privilege may distort) is on a fixed standard, it would have secular price level that would pin down the level of base+debt. If not, inflation target=2%, it will be able to keep on creating M+B to enable that inflation. What will it buy with that M+B? I don't know.. that's politics, but it may be the ones mentioned above. Ricardonoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-16270859991788761472020-06-30T22:04:21.978-04:002020-06-30T22:04:21.978-04:00I used a logarithmic scale to make comparison over...I used a logarithmic scale to make comparison over time possible.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-49031962892252272122020-06-30T22:03:33.539-04:002020-06-30T22:03:33.539-04:00I suppose you could say that it's not income, ...I suppose you could say that it's not income, it's just inter-governmental accounting. <br /><br />Let's put it differently. Say the Fed can either own 100% government bonds or 100% corporate bonds. If it holds 100% government bonds, then the government has to pay less interest to the private sector than the alternative. <br /><br />So yes, I still see both scenarios as generating seigniorage. Whether Fed holds all government bonds or all corporate bonds, real resources are being transferred to the government.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-17783558280075040872020-06-30T07:01:24.799-04:002020-06-30T07:01:24.799-04:00The CPI standard is recent, no?
And that chart has...The CPI standard is recent, no?<br />And that chart has a distorted y axis, that will smooth the inflection.Ricardonoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-9630820653131733682020-06-30T06:54:41.292-04:002020-06-30T06:54:41.292-04:00I don't see why governments would be able to i...I don't see why governments would be able to issue more debt under on a CPI, or fiat, standard (say post-1969) than on a gold standard (pre-1969).<br /><br />In the US's case, I don't see much of an inflection point at 1971.<br /><br />https://fred.stlouisfed.org/graph/?g=ss4WJP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-24981079723251045512020-06-30T06:21:45.367-04:002020-06-30T06:21:45.367-04:00> JP
In your calculations you did not take in...> JP <br /><br />In your calculations you did not take into account the issuer of the bonds. Interest past from the Fed to the government is not income for the government when it comes from the governments own coupon payments. I am thinking that in the classical case where all of the CB assets are government bonds the the seigniorage is less than small , it is zero.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-19293924536746581502020-06-30T05:11:26.168-04:002020-06-30T05:11:26.168-04:00The amount of monetary base+gov.debt that could be...The amount of monetary base+gov.debt that could be issued in a gold standard would be inferior to the one with fiat money. (I said gold, but you could substitute with any fixed price anchor, I guess). So fiat money allows not only for seigniorage but as well for the "inflation tax" that depends on the expansion of monetary base+gov.debt.Ricardonoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-74263039759044583222020-06-29T16:21:39.994-04:002020-06-29T16:21:39.994-04:00Not sure I follow.Not sure I follow.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-88476564127314897512020-06-29T16:20:18.373-04:002020-06-29T16:20:18.373-04:00The meme I'm attacking in my post specifically...The meme I'm attacking in my post specifically blames fiat money for facilitating wars, the police state, etc. And I've debunked that meme by showing that seigniorage is minuscule, and so it isn't responsible for funding the stuff for which it is blamed.<br /><br />I don't have a clue where you're going with your reply, but I'll bite.<br /><br />"Seigniorage could hypothetically exist in a deflationary system as well."<br /><br />As deflation increases, seigniorage falls to zero. Say that the price level is falling by around 2-3% per year. Then due to the Fisher effect, nominal interest rates on bonds would be ~0%. So the Fed's profit, or seigniorage would fall to zero (because it earns 0% on bonds while paying 0% on banknotes).JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-64901910160854519372020-06-29T11:35:00.982-04:002020-06-29T11:35:00.982-04:00But isnt fiat money "responsible" for th...But isnt fiat money "responsible" for the huge amount of State debt (as in Gov.debt+monetary base) without sustainability concerns?<br />Isnt that debt a form of "revenue"?Ricardonoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-67959106111211480932020-06-29T10:59:24.928-04:002020-06-29T10:59:24.928-04:00> But to address your point, this post is speci...> But to address your point, this post is specifically about the seigniorage claim.<br /><br />I'm unaware of such a claim. Indeed as Pierre specifically says "inflationary", that should be a hint that it's not about seigniorage. Seigniorage could hypothetically exist in a deflationary system as well.Peter Šurdahttps://www.blogger.com/profile/02219200720577247444noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-49155787405177228562020-06-29T09:49:55.375-04:002020-06-29T09:49:55.375-04:00"I'm baffled why you..."
Well, you ..."I'm baffled why you..."<br /><br />Well, you get baffled by a lot of stuff, Peter ;)<br /><br />But to address your point, this post is specifically about the seigniorage claim. I could write another one addressing the Cantillon effects claim, if there is demand for it.<br /><br />For the record, I've written about Cantillon effects before:<br /><br />https://jpkoning.blogspot.com/2012/12/the-great-monetary-injection-debate-of.htmlJP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-36671708766390398172020-06-29T09:03:54.183-04:002020-06-29T09:03:54.183-04:00Not through seigniorage, but through Cantillon eff...Not through seigniorage, but through Cantillon effects. Seignorage pre-dates fiat money. Well technically seigniorage could be said to be a very simple form a Cantillon effect, but this isn't what the issue is about. I'm baffled why you haven't familiarised yourself with the argument first before making a post.Peter Šurdahttps://www.blogger.com/profile/02219200720577247444noreply@blogger.com