SV: SV: elr and mosler/censorship

["Per Gunnar Berglund" <pgb@xxxxxxxxxxxxxxxxxx>]

Thanks for going in here, Warren. I am not entirely confident that you got
my point, though.

First, the liquidity of a 30-year bond to a particular individual is not
the same thing as its 'social' liquidity. one individual can always sell an
illiquid asset for money, provided there are other individuals that accept
to go illiquid. In the aggregate, however, the stock of long-term bonds
cannot be 'liquified' unless government (or private banks) intervene as
buyers. This, I believe, is a central point of the Keynesian theory of
liquidity preference.

Second, the net financial position of the private sector (in a closed
system) cannot be changed without a mirror image change of the government
position. But the quantity of money can be changed without any change at
all in the government position. The private sector (banks) can create
short-term liquid debt, money that is, as a completely 'internal' affair.
The crucial point as to the ELR propositions here, is whether people work
for *money* wages or for 'financial assets wages'. I claim that people work
for money wages, but it seems to me that the FEAPS is claiming that people
work for any financial asset compensation. Did I get this wrong?

My PK-est regards,

Per

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Från: Warren Mosler <mosler@xxxxxxxx>
Till: POST-KEYNESIAN THOUGHT   <pkt@xxxxxxxxxxxxxxxx>
Ämne: Re: SV: elr and mosler/censorship
Datum:  den 8 mars 1997 13:37

At 12:38 PM 3/8/97 +0100, you wrote:
>Mason,
>
>You are perfectly right about the real savings matter. Distinction between
>real and financial savings is crucial as every PK-er should recognise.
>Every PK-er also ought to recognise the important difference between
>financial assets in general and (credit) money, the latter being a subset
>of the former. Maybe the Mosler approach would gain in precision by
>bringing out this difference and clarifying its implications.
>
>The private sector's desired financial savings (or H(nfa) as Mosler has
it,
>using somewhat home-cooked terms) is *not* the same thing as the private
>sector's desired money hoarding. The financial asset portfolio may include
>long-term debt, i.e. 30-year treasury bonds, which are even less liquid
>than many real assets. (Credit) money must denote the *liquid* part of the
>financial assets, i.e. short-term bonds, cash and check-account deposits.

No conceptual argument, but currently US 30 year tsy bonds are trading
with a 1/32 bid offer spread.  That means the difference between the price
to buy and sell $1mm is only $312.50.
  >
>The private sector's financial asset desire may be satisfied by
acquisition
>of long-term debt, leaving the (government borrowing part of) the money
>stock more or less unchanged.

Carefull here.  The NET financial  position of the private sector is not
changed
without govt 'intervention.'

Warren

 Apart from this, private banks can issue
>money at will by extending their balance sheets, the only restriction
being
>the legal reserve requirement, which is a condition imposed by man and not
>a natural law. Some countries have abandoned reserve banking, which does
>inhibit the workings of the 'money multiplier', and ensures that the
>quantity of money is limited only by the 'supply price' of borrowing
money,
>i.e the rate of interest. Vide Wicksell's "Interest and Prices" and also
>Basil Moore's brilliant "Horizontalists and Verticalists".
>
>Over to the real assets question: Most of these assets are, in some way,
>valued on the second-hand asset markets. For instance, I gather you are
>able to estimate (approximately) the potential sales value of your own
>home. The chief trouble is not the money value of the capital stock, but
>how to split this value in price-level and volume dimensions. Now, this is
>not a matter for grandpa at this stage. I do admire the ambition to
explain
>economic matters in a language that everyone can understand. But this
>ambition must not be driven so far that it bars scientific discussion and
>progress. Some details of this god-forgotten subject is expert stuff, of
>which grandpa will have to make do with a rough understanding.
>
>Kindly,
>
>Per
>
>Per Gunnar Berglund
>Lilla Sällskapets väg 60
>S-127 61  SKÄRHOLMEN
>SWEDEN
>Phone/fax +46-(0)888 3065
>
>----------
>> Från: Mason A. Clark <masonc@xxxxxxxxxxxxx>
>> Till: POST-KEYNESIAN THOUGHT   <pkt@xxxxxxxxxxxxxxxx>
>> Ämne: Re: elr and mosler/censorship
>> Datum:  den 8 mars 1997 09:31
>>
>> At 04:07 PM 3/6/97 -0700, you wrote:
>> >on elr
>> >after warren's post, i finally saw what mason was getting at; it was
>> >then corrected by bill m. mason wondered if "we" were arguing that
>> >only govt can provide for net private sector saving.
>>
>>   Well, actually, I'm sitting under the roof of a substantial
>>   part of my "savings".  The suggestion that I'm a naughty boy
>>   for not saving enough - cause roofs don't count - bothers me.
>>   Must I collect government paper to be a "true saver"?
>>
>>   I understand that money is not neutral.  That said, I sense
>>   perhaps wrongly, that real objects - especially those not
>>   "on the market" are not given much recognition in economic
>>   theory.  An example: in Social Security worries, the huge
>>   pile of things and inventions we are leaving to our grandchildren.
>>   This huge pile, lacking market evaluation, seems to be ignored.
>>   This being ignored in the books makes re-educating grandpa
>>   difficult.
>>
>>        Mason
>>
>>   Can I teach grandpa about "volume measures"?
>>
>
>

Warren B. Mosler
Director of Economic Analysis
III Finance

See:

"Soft Currency Economics"
=========================
http://inca.gate.net/~mosler/softecon.html

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