Re: Printing Money -Reply

[Bruce McFarling <brmcf@xxxxxxxxxxxxxx>]

A remarkable point is that in every Principles text I
have ever used, the money multiplier is taken from
M = [1/(Required Reserve Ratio)]*Reserves to the
more complete

M =  __1_+_Cr__ x Reserves
      Rr+Er+Cr

Cr - Ratio Currency to Deposits
Rr - Ratio Required Reserves to Deposits
Er - Ratio Excess Reserves to Deposits

where it is obvious by inspection that two of the three
terms in the multiplier are not in the hands of the Fed
except by manipulating interest rates in some fashion.
Then, after establishing that the furthest that we
can go to exogeneous money supply is determining an
exogeneous maximum to the money supply, which would give
a capacity constrained curve, blithely proceeds to draw
a vertical money supply curve!
	In short, with the stated rules of money creation,
the alternatives range from a horizontal to a capacity
constrained curve (horizontal curving toward vertical
as the capacity is approached), the texts all contradict
their one description of the rules of the game and
present a 'simplification' that breaks the rules that
it went to some length to describe!

Virtually,

Bruce McFarling, Knoxville
brmcf@xxxxxxxxxxxxxx