Richard Murphy: Zergatik DTM? Warren Mosler-ekiko eztabaida (3)

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Richard Murphy: Zergatik DTM? Warren Mosler-ekiko eztabaida

Richard Murphy: Zergatik DTM? Warren Mosler-ekiko eztabaida (2)


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warren mosler says:

February 25 2018 at 8:52 pm

Let also suggest that the so called private banking sector is a lot more private than, say, the military?
First, banks must be state chartered.
Second, for all practical purposes their deposits are state insured, so they are risking public funds when they lend, and are regulated and supervised accordingly.
Third, regulation in the US is known as CAMELS
C is capital- the state makes and enforces the capital rules.
A is asset quality- the state makes and enforces all the rules regarding required asset quality,
including which assets qualifying and which are not permitted.
M is management- the state has full control of bank management and can make changes at will
E is earnings- the state determines how banks account for earnings which add to capital and sets standards to ensure earning and capital are growing as required
L is liquidity- the state sets and enforces liquidity minimums
S is interest rate sensitivity- borrowing short and lending long, for example is not permitted as it creates exposure to changes in interest rates.

What’s left for management is ‘pricing risk’ which means interest rate determination, with banks competing with each other to both make loans and retain deposits. Yes, loans create deposits, but banks must then compete for those deposits.


John Dorge says:

February 25 2018 at 8:12 am

Hello Warren/Richard,

Could you please explain the central bank setting of interest rates in an environment of double-entry book keeping? In other words, how does a central bank play a role in the price a commercial bank sets for the money it originates?


 Richard Murphy says:

February 25 2018 at 10:00 am

I think Warren can better do that

Allow for time differences, please

warren mosler says:

February 25 2018 at 8:56 pm

If the state has a floating exchange rate policy and doesn’t take action to support rates at a higher than 0% level, the policy rate will be 0%.
The primary means of supporting rates today is either the sale of Treasury securities, which are nothing more than interest bearing time deposits at the central bank, or by creating excess reserves and then paying interest on those excess reserves. That is, it takes state initiative to sustain a positive policy rate (which I happen to call basic income for those who already have money). And in that sense I say that with a floating exchange rate policy that natural rate of interest is 0%.


Norman Willcox says:

February 25 2018 at 8:17 pm

Usual aggressive reply without addressing the point. No one defined the term “transition employment”.
Who pays? How are you going to get government or local government to offer jobs even at below subsistence living wages?

Richard Murphy says:

February 25 2018 at 9:53 pm

The government pays

There is no aim to provide below subsistence wages

We have a minimum wage

Many people live on it

warren mosler says:

February 25 2018 at 9:13 pm

The money story begins with a state desiring to provision itself.
To do this it must move real resources from private to public domain.
It does this by levying a tax payable in its own currency for which it is the single supplier.
This functions to create sellers of goods and of services, such as labor, seeking the needed currency.
We define people looking for paid work who haven’t yet found it as unemployed.
Therefore it can be said that in the first instance taxes function to create unemployment,
for the further purpose of the state then hiring those its tax caused to become unemployed.
The state then hires those it caused to become unemployed, thereby provisioning itself.
If the tax created more unemployed than the state desired to hire, the evidence is the residual unemployment. (And note that there is no unemployment as we know and define it in non monetary societies.)
The state can then ‘correct it’s error’ by either hiring the remaining unemployed or lowering the tax liabilities until they return to the private sector.
However, private sector agents don’t like to hire unemployed workers, but instead prefer to hire those already working. It’s risky to hire unemployed as employers don’t know if they’ll be punctual, clean, or display confrontational and disruptive behavior on the job, etc.
That is, the state has damaged people by causing them to become unemployed and then not hiring them.
Therefore I propose the state offer a transition job for anyone willing and able to work, for the further purpose of facilitating the transition from unemployment to private sector employment.

For the US, I have proposed that first the Federal govt. notifies all Federal supervisors that they can hire anyone willing to work for them at the transition job wage, in full knowledge that these people will be susceptible to being hired away from them by private sector employers. After 90 days, the program will be extended to the state and local governments, and after another 90 days it will be extended to the non profit sector, which should be sufficient for all those willing and able to become transition workers to find employment.

I’ve also proposed that initially the transition job wage be fixed and ‘non disruptive’ as the purpose is not to attract workers who are already employed in the private sector by offering higher wages.
The transition job can also come with benefits such as paid vacation, etc. which introduces benefits ‘from the bottom up’ and works to cause private sector employers to offer similar benefits.

warren mosler says:

February 25 2018 at 9:17 pm

And let me add that an employed transition job buffer stock has every reason to function as a superior price anchor to today’s policy of unemployment as a buffer stock, again because transition workers are far more ‘liquid’ with regard to transitioning to private sector employment than unemployed workers.

That is, this is an anti inflationary policy vs today’s policies, and it also provides a form of full employment that’s been called ‘loose full employment’.


Richard Murphy: Zergatik DTM? Warren Mosler-ekiko eztabaida (2) | Heterodoxia, diru teoria modernoa eta finantza ingeniaritza says:

February 25 2018 at 6:23 pm

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