tag:blogger.com,1999:blog-6704573462403312459.post5608855493108271764..comments2024-03-29T02:53:03.321-04:00Comments on Moneyness: How much are Warren Mosler's business cards worth?JP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger53125tag:blogger.com,1999:blog-6704573462403312459.post-5279235946914463932019-09-16T06:53:42.762-04:002019-09-16T06:53:42.762-04:00No one in the comments that I have read seems to r...No one in the comments that I have read seems to realize that the bouncer at the door is an analogy for the US Armed Forces.Happy Richeshttps://www.blogger.com/profile/08987034800727836062noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-77140715081141246862018-02-16T06:33:27.938-05:002018-02-16T06:33:27.938-05:00"The Fed does so by selling assets. It has go... "The Fed does so by selling assets. It has gold, bonds, foreign exchange, economics books, and other things in its vaults which it will continuously use to purchase dollars until the urge to divest dollars has been quenched." Koning... you should not spent time with MMT... You are unwilling to remember.... MMT basics... misohttps://www.blogger.com/profile/16269594336234646458noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-50480394376599437182018-02-16T06:26:41.702-05:002018-02-16T06:26:41.702-05:00 Hyman Minsky used to say that “Anyone can create ... Hyman Minsky used to say that “Anyone can create money”; but “the problem lies in getting it accepted”. You must understand that “money” is by nature an IOU.misohttps://www.blogger.com/profile/16269594336234646458noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-83060942059656422202013-12-03T02:48:48.483-05:002013-12-03T02:48:48.483-05:00I'm sorry but I don't see how a central ba...I'm sorry but I don't see how a central bank could be hoped to ensure continued use of a fiat currency in the absence of the government backstopping that currency.<br />If a currency was being abandoned due to the population choosing to move over to using another currency, then MBS denominated in the abandoned currency would also start becoming utterly worthless. If the central bank started selling off its stock of MBS as a way of trying to create scarcity of its base money, the price impact of that selling would mean that less base money would be recovered than previously had been created when the central bank bought its stock of MBS in the first place. This is particularly true when the starting point is a vast excess of bank reserves such as currently in the USA, Japan or the UK. The central bank could sell off ALL of its assets and there could still be a glut of essentially worthless base money. The long duration of assets such as >10year MBS means that they have a price that swings around much more than the currency value. Obviously IF the central bank had plenty of foreign currency denominated assets then things would be different BUT that isn't the case with say the Fed is it?<br />stonehttp://directeconomicdemocracy.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-34828234206394796922013-06-09T11:54:50.539-04:002013-06-09T11:54:50.539-04:00James:
If the Fed has a $100 MBS (or any other ki...James:<br /><br />If the Fed has a $100 MBS (or any other kind of asset) then the Fed can sell the MBS back to the homeowner who issued it, in exchange for $100 of federal reserve notes. The homeowner then burns the MBS, while the Fed burns the federal reserve notes.<br /><br /> The same thing could happen indirectly: The Fed pays $100 of MBS for $100 of FRN's, and burns the FRN's. The new holder of the MBS demands payment of $100 of FRN's from the homeowner, and the homeowner burns the MBS. End result is that both the MBS and the FRN's get burned.Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-12213736836533817132013-06-09T09:07:23.183-04:002013-06-09T09:07:23.183-04:00JP,
"large open market sales of MBS should m...JP,<br /><br />"large open market sales of MBS should mop up excess dollars and prop up the exchange rate"<br /><br />MBS are just promises to pay more dollars in future. Why would exchanging present dollars for promises to pay more dollars in future (MBS) give a value to dollars (i.e prop up the exchange rate)?Jamesnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-61881883212520770402013-06-08T22:53:10.128-04:002013-06-08T22:53:10.128-04:00"Ok, let me try something even more stripped ..."Ok, let me try something even more stripped down. The monarch abdicates and privatizes the apparatus of the state. There are no more taxes."<br /><br />There would also be no more property rights, or contractual enforcement, would there? The "Taxes Drive Money" narrative is a useful shorthand, but should really be extended to include the Judicial Branch, i.e. "monetary obligations drive currency". So unless your anarchtopia did not have any mechanism for contractual or property rights enforcement, it seems there would always have to be some body imposing tax-like obligations, which would then - thanks to twintopf - be likely to become the defacto unit of account and main currency.Rohannoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-27130265799135239472013-06-08T22:46:15.713-04:002013-06-08T22:46:15.713-04:00I disagree this is spot on, and i think an examina...I disagree this is spot on, and i think an examination of the history of currency develop tends to confirm that it is the power to dictate what currency is acceptable at the state level that determines what people use as the main Currency. <br /><br />Christine Desan has done a lot of the heavy lifting on the legal history of this with regards to English and American law - have you read much of her work? If not, I would highly suggest doing so. <br /><br />In addition, i think a point you are not thinking about here is that taxes do not just include proactively imposed income taxes and the like, but all forms of legally incurred liabilities. This includes contracts, property claims, tort duties, etc. So it's not just interactions with the government during which the value of dollars becomes worthless, it is also in any private interaction that imposes a legal obligation.<br /><br />So everytime a Wall Street firm that was continuing to operate in $US had a legal dispute and got a damages award, they would only be required to pay in Mosler cards (of course, most of the time people settle, but even then the tendency to settlement would be informed by the knowledge that only the nominal value in Mosler cards would be enforceable). <br /><br />Indeed, I could even steal your $US account holdings, and your only form of redress (apart from criminal sanctions) would petition for damages . . . in Warren cards. An interesting examination of the significance of legal nominalism can be found in David Fox's "Case of Mixt Moneys: Confirming Nominalism in Common Law of Obligations" article (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1763741).<br /><br />At a more basic level, I am confused why in your thought experiment the Federal Reserve would continue to intervene to defend the value of the $US in this situation, if the $US had ceased to become legal tender? Does the Fed intervene in the manner you are talking about if the price of American goods and services as denominated in pesos, or the pound, changes? Surely if the government switched over to Mosler cards, the Fed would be responsible for defending the price in $Mosler, not $US, unless they also simultaneously abandoned floating fx. It seems the thought experiment is incomplete, which is why you are getting an anomalous outcome.Rohannoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-45404615629004348062013-06-08T22:24:59.446-04:002013-06-08T22:24:59.446-04:00Uhhmmmm: This is almost too obvious to even commen...Uhhmmmm: This is almost too obvious to even comment. So the Fed--a branch of govt--stands ready to buy dollars in exchange for gold; so dollars retain some value. And that disproves Warren's point?<br /><br />Taxes Drive Money is a sufficient condition to drive a currency. No one ever said it is a necessary condition. If I've got Fort Knox and I want to buy--oh, let us say--Zimbabwe's currency, I can keep it valuable even if Zimbabwe abolishes all taxes.LRWrayhttp://www.economonitor.com/lrwray/noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-84456447788820814762013-06-07T17:28:12.009-04:002013-06-07T17:28:12.009-04:00Suppose Warren promises a price level target with ...Suppose Warren promises a price level target with the price of his cards falling at 2% per year.<br /><br />If people believe his promise, nobody will hold his cards. They will wait until the very last second before they leave the room to buy one.<br /><br />If people think he might renege on his promise and let the price of his cards fall faster than 2%, people will be even more unwilling to hold his cards.<br /><br />If people think he might renege on his promise and make the price of his cards *rise*, people might want to hold some, for capital gains, or just as an insurance policy (to insure against a high price of cards at exactly the time they want to leave the room).Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-14552918159741474752013-06-07T00:23:22.237-04:002013-06-07T00:23:22.237-04:00Nick: "...on his promise to target inflation,...Nick: "...on his promise to target inflation, stop putting his cards back into circulation, so the price will rise a lot."<br /><br />If there's a probability that Mosler'll renege doesn't that mean the price will fall? Or do you mean to say that it will fall to a lower price and from there rise a lot in order to provide a return sufficient for people to hold it?<br /><br />Mike: Thanks for the analogy. Sounds like my chequing deposit. I'm paying yearly fees of 1% or so, but I don't cash in since deposits are so convenient.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-16571320449270237582013-06-06T12:42:54.439-04:002013-06-06T12:42:54.439-04:00Warren:
1) A green piece of paper relieves you of...Warren:<br /><br />1) A green piece of paper relieves you of having to pay 1 oz of silver to the paper's issuer. A blue piece of paper entitles you to claim 1 oz of silver from the paper's issuer. Both pieces of paper are backed by the issuer's assets, and both will be worth 1 oz. There is no need for the circular "worth what it can buy" theory.<br /><br />2) The Fed sells its assets (mainly bonds) for dollars all the time, and it would not 'run out'. It has plenty of assets to buy back all the dollars it has issued at their current value.<br /><br />3) The confederate dollar lost value because its issuer lost its assets, which had consisted mostly of future taxes receivable. That's consistent with the idea that the value of money is determined by the value of its issuer's assets.Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-78449594020643344092013-06-06T11:03:42.098-04:002013-06-06T11:03:42.098-04:00JP @8:34. We could get a "Peso Problem" ...JP @8:34. We could get a "Peso Problem" equilibrium, where everyone thinks there is a small probability that Warren will at some unknown future time renege on his promise to target inflation, stop putting his cards back into circulation, so the price will rise a lot.<br /><br />JP @8:54. That is certainly theoretically possible. Empirically, from observing hyperinflations, we know that it will not happen until inflation gets very very high. Only in Zimbabwe did it happen, AFAIK. The demand curve for central bank money has a very very high intercept where it hits the vertical axis. It seems to asymptote towards the vertical axis, more or less. There's an incredible amount of ruin in even a crappy currency, once everyone gets used to it. Massive Mengerian network effects.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-50484635657867982662013-06-06T10:30:42.784-04:002013-06-06T10:30:42.784-04:00JP:
The old Bank of Amsterdam used to charge an a...JP:<br /><br />The old Bank of Amsterdam used to charge an annual storage fee of 2-3% for its bank money, so they had a situation just like you are describing. People kept their money in the bank because the liquidity services of the money were maybe 10%/year. If liquidity services fell below 2-3% then people would withdraw their money. So it looks like the answer to your question is that nothing weird happens as long as liquidity services are big enough to offset the 2-3% inflation, but if inflation gets too high, then people will either let their money reflux to the bank (through various reflux channels), or the money will fall to zero. Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-89430679632186292482013-06-06T08:54:05.042-04:002013-06-06T08:54:05.042-04:00Another thought. Will there be an equilibrium pric...Another thought. Will there be an equilibrium price for central bank money when a central bank decides to make its notes fall by 3% rather than just 2% a year, all other asset yields and returns staying the same? Why wouldn't the stock demand evaporate and central bank notes fall to $0?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-32909720413363658622013-06-06T08:34:15.316-04:002013-06-06T08:34:15.316-04:00Couldn't we have a sort of Chuck Norris effect...Couldn't we have a sort of Chuck Norris effect. As long as everyone expects that Warren will do something dramatic to hit the target, then Warren doesn't actually have to do anything dramatic? JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-62558971382672927182013-06-06T08:26:47.555-04:002013-06-06T08:26:47.555-04:00Lol, you're making this way too complicated th...Lol, you're making this way too complicated than it needs to be. Send me a private email if you want to continue the discussion, but I don't want to continue it here lest it become painful for future readers of the comments section.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-34137140027675293042013-06-06T07:57:03.929-04:002013-06-06T07:57:03.929-04:00There's a real-world example of Warren's &...There's a real-world example of Warren's 'business cards' economy:<br /><br />http://www.huffingtonpost.com/warren-mosler/the-umkc-buckaroo-a-curre_b_970447.htmlJamesnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-43705108870115177062013-06-05T23:01:39.729-04:002013-06-05T23:01:39.729-04:00I suspect that if you 'translate' Austrian...I suspect that if you 'translate' Austrian economics from fixed fx to floating fx you get MMTWarren Moslerhttps://www.blogger.com/profile/10482768786644478587noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-56497304630618227452013-06-05T20:47:26.089-04:002013-06-05T20:47:26.089-04:00You assume that Warren is price level path targeti...You assume that Warren is price level path targeting. If he were inflation targeting, he would let bygones be bygones for the initial price collapse.<br /><br />But even if he were price level path targeting, there cannot be an equilibrium path in which the price of his cards falls and is expected to fall by 2% per year and people hold strictly positive stocks (unless other equally illiquid assets also yield minus 2%). People would hold positive stocks if the actual price fell below the target path, expecting Warren to buy them back to get back up to the target path. But Warren would need to buy them (almost) all back to hit that target path.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-40410801120596989612013-06-05T17:49:23.700-04:002013-06-05T17:49:23.700-04:00If the government privatized the central bank, it ...If the government privatized the central bank, it would have to sell off all the bank's assets. Presumably these would have to be bought with the central bank's own liabilities... Wouldn't this reduce the amount of outstanding cb liabilities to near-zero?<br /><br />Also, if the government decided to end itself it would, I assume, sell off its real assets in exchange for outstanding bonds or cb/state liabilities, thus extinguishing those bonds and other liabilities.<br /><br />So it seems like all you'd be left with is private debts and real assets. <br /><br />However all those private debts, including MBS, are denominated in US dollars - and US dollars would no longer exist, in the sense that US dollars are specifically liabilities of the state, and if the state no longer exists then those state liabilities also no longer exist. A new, private, central bank/clearing house wouldn’t have a legal right to print ‘US dollars’. It would have to issue a new currency of its own. <br /><br />Which means that all those private debt contracts would have to be re-written... But on what basis would creditors have the legal right to demand payment in some other asset?<br /><br />It sounds like what you're actually describing in your hypothetical example is the complete implosion of the monetary system!<br />Jamesnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-81605915127830567152013-06-05T14:52:59.758-04:002013-06-05T14:52:59.758-04:00If the dollar were to fall against other currencie...If the dollar were to fall against other currencies it seems to me that large open market sales of MBS should mop up excess dollars and prop up the exchange rate. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-66342765645522839262013-06-05T13:59:12.416-04:002013-06-05T13:59:12.416-04:00All newly created money causes a market distortion...All newly created money causes a market distortion. This is the so called Cantillon effect. The ABCT depends on a particular distortion, when this new money is used for investment. This is technically caused by fractional reserve commercial banking, not by the central bank. Robert Murphy himself explained this in his Mises Academy course "Economics of the Great Depression", I suppose he didn't have enough time in the debate to emphasise this nuance. Central banks only exacerbate this and add new problems.<br /><br />The interest rate changes are merely another way of looking at the problem, they might not be the best way to understand the argument.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-79496836945783470622013-06-05T11:50:46.747-04:002013-06-05T11:50:46.747-04:00exchanging mbs for dollars doesn't support the...exchanging mbs for dollars doesn't support the fx value of the dollar, no?Warren Moslerhttps://www.blogger.com/profile/10482768786644478587noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-35969441168022290592013-06-05T09:31:53.702-04:002013-06-05T09:31:53.702-04:00I agree that if other assets yield say 0%, and War...I agree that if other assets yield say 0%, and Warren's cards yield -2%, then nobody in their right mind will want to hold them. (I suppose that cash is different since it provides a large non-pecuniary return, enough to outweigh its negative pecuniary return? But say that the non-pecuniary return on Warren's cards or small). <br /><br />So from the time Warren announces the -2% target, the stock demand evaporates and everyone is a seller. Card prices immediately begin to collapse. Once they fall by more than 2%, say they have dropped by 3%, it makes sense to become a stock holder again. Warren promises to ensure that the decline doesn't go beyond -2% a year, so if you buy after the 3% fall you're guaranteed a 1% return. The stock demand re-emerges. If Warren reneges on his promise, then the price will fall to $0.<br /><br />But I'm not sure about this. What do you think? JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com