Dirua: transakzio bertikalak eta horizontalak (2)

1 Ikus “A General Framework for the Analysis of Currencies and Commodities.” in P. Davidson and J. Kregel (eds.) Full Employment and Price Stability in a Global Economy. Cheltenham: Edward Elgar. http://www.mosler.org/docs/docs/general2.htm eta A General Analytical Framework for the Analysis of Currencies and Other Commodities.

2 Ingelesez: “Keynes lashed out against neoclassical theory for treating capitalism as a barter or “real-exchange” economy, and offered his “monetary theory of production” as an alternative to the traditional approach based on the “Classical dichotomy.” This aspect of Keynes’s work has been developed by two traditions, the Post Keynesian and the Circulation Approaches (Deleplace and Nell, 1996).”

3 Ingelesez: “Post Keynesians have elaborated, among other topics, the relation of money (and money contracts), uncertainty, and historical time (Davidson), asset pricing and financial instability (Minsky), and endogenous money and credit creation (Moore, Wray). While Post Keynesians have generally emphasized money as a stock of wealth…”

4 Ingelesez: “…, circuit theory (Graziani, Parguez, Schmitt) has highlighted the importance of a rigorous analysis of the circulation of money for understanding the operation of capitalist economies, including the principle of effective demand.”

5 Ingelesez: “Both Post Keynesian and Circulation Approaches accept the widely held view that modern money is not commodity money but rather token (or fiat) money (see, e.g., Moore, 1988; Graziani, 1988). But they criticize conventional theory for continuing to utilize a framework that treats modern money as though it were still a commodity money.”

6 Ingelesez: “This paper begins with two comments on this fundamental point. First, while modern money does not derive its value from its status as a commodity, once a token is declared necessary for the payment of taxes it can be analyzed like any other commodity. Second, absent from most Post Keynesian and Circuit analyses is the institutional process by which a token obtains its value (becomes money). (…)

Analyses of the circuit that begin with banks financing firms’ production (or households’ purchases) and end with firms (or households) paying back their loans leave unanswered the question of why anyone would initially sell real goods or services for the unit of account. The “common-sense” reply, “because they can use the funds to buy other goods and services” is not a satisfying one, for the further ‘infinite regress’ question remains the same: “why do those sellers want the unit of account?” What is missing is the process by which the unit of account is endowed with value. 

This paper takes the position that the question remains unanswered because it cannot be (adequately) answered unless the State is incorporated from the very beginning of the analysis. “Money is a Creature of the State” (Lerner), and thus a “monetary” analysis cannot be conducted prior to the introduction of the State. Interestingly, the Chartalist view of a tax driven currency can be found in the writings of Keynes (not to mention Adam Smith!), the Post Keynesians, and the Circulation theorists, yet it is almost always presented as an aside, with the implications remaining unexplored (see Wray, 1998, on Smith, Keynes, and Post Keynesians such as Minsky; for the Circulationists, see Graziani, 1988).”

7 Ingelesez: “In the Chartalist view, the State, desirous of moving various goods and services from the private sector to the public domain, first levies a tax. The State currency unit is defined as that which is acceptable for the payment of taxes. The imperative to pay taxes thus becomes the force driving the monetary circuit. The present paper seeks to refine the concept of the monetary circuit using a multidimensional model designed to reveal and illuminate the workings of a tax- driven currency. It will also be shown that this same model lends itself to the analysis of any commodity. In an adaptation of Moore’s (1988) terminology, the model includes “horizontal” and “vertical” components of the monetary circuit. Following outline and discussion of the model, it will be utilized to dispel the myth that deficits imply future taxation, as well as to briefly analyze the 1997 Asian Financial Crisis.”

8 Ingelesez: “The tax liability lies at the bottom of the vertical, exogenous, component of the currency. At the top is the State (here presented as a consolidated Treasury and Central Bank), which is effectively the sole issuer of units of its currency, as it controls the issue of currency units by any of its designated agents. The middle is occupied by the private sector. It exchanges goods and services for the currency units of the state, pays taxes, and accumulates what is left over (State deficit spending) in the form of cash in circulation, reserves (clearing balances at the State’s Central Bank), or Treasury securities (“deposits” offered by the CB). For comparative purposes later in the paper, this accumulation will be considered “warehoused.” The currency units used for the payment of taxes (or any other currency units transferred to the State), for this analysis, is considered to be consumed (destroyed) in the process. As the State can issue paper currency units or accounting information at the CB at will, tax payments need not be considered a reflux back to the state for the process to continue. In fact, the assumption of such reflux would imply a function of that process that this analysis emphasizes does not exist.

This completes the basic vertical component. Agents are said to participate in vertical activity if they obtain the unit of account from the State, pay taxes to the State, or intermediate the process. Central bank policy determines the relative distribution of the accumulated currency units of the private sector between cash, reserves (clearing balances), and Treasury securities. State (deficit) spending determines the magnitude of those accumulated financial assets.”

9 Ingelesez: “The horizontal component concerns the broad category of credit. In contrast with the vertical component, gross expansion of the horizontal component is endogenous, and nets to 0. The majority of circuit analysis begins and ends with the horizontal component. Even when the State is introduced, it too is assumed to behave horizontally. State taxing and borrowing are treated identically to private sector selling and borrowing. Though this treatment of the State may not be technically incorrect, the use of the vertical component adds a characterization of State activity previously ignored.

Any commodity has at least a vertical component. Horizontal activity represents leveraged activity of a vertical component. For analytical purposes, a unit of a currency is a commodity with no cost of production, no substitution, no inherent storage costs or transaction costs, and no product differentiation. Corn can be used to specifically demonstrate how a currency lends itself to the same analysis as commodities.”

10 Ingelesez: “With corn, the farmer can be considered at the top of the vertical component, and consumption (eating) at the bottom. The private sector remains in the middle, and transfers non corn (generally units of a currency) up to the farmer who sends down the corn in exchange. If the private sector purchases more corn than it immediately consumes, the difference is warehoused (accumulated). If we were to use the same language with corn as we do with currency, we would say that when the farmer exchanges more corn to the private sector than the private sector consumes, the farmer is engaging in the deficit spending of corn.”

11 Ingelesez: “The corn futures market is a leveraging of physical corn. There is a short position for every long position. Likewise, the creation of bank loans and their corresponding deposits is a leveraging of the currency, and every short position, or borrower, has a long position, or depositor, on the other side of the ledger. The futures market also happens to be a market that leverages the currency, as corn, for example, is exchanged for units of the currency. Thus the horizontal component for currency analysis can be indicated by introducing credit into the picture.”

12 Ingelesez. “This model is consistent with the Post Keynesian notion that reserve imbalances can be reconciled only by the central bank. In this model, the horizontal activity always nets to 0. Reserves are clearing balances that can only come from vertical activity. Furthermore, in the US system, the Fed controls the mix in the “warehouse” and can, for example, by purchasing securities on the open market, decrease securities held by the private sector and increase reserves of the private sector (clearing balances). Because of deposit insurance, in effect the Fed guarantees that inter-bank checks will clear when presented at the Fed. This means that if the banking system doesn’t have sufficient reserves as required by the Fed, at least one bank will be showing an overdraft at its account at the Fed. Such an overdraft is, of course, a loan from the Fed, and an example of vertical activity. So, in the US system, required reserves come from the Fed in one form or another on demand, and the Fed sets the terms of exchange–interest rate and collateral–for the transaction.”