mosler sem./money as "hoarding" vehicle

["Gregoire de Nowell (ci-devant)" <GN842@xxxxxxxxxxxxxxxxx>]

I can "see" the argument that unemployment is an indication
of "unmet savings needs" in the sense if the desired
level of (planned) savings exceeds the desired level of
(planned) investment we can have net reduction in economic
output.  Thus in a certain sense the creation of a debt
investment instrument - such as a T-bill - helps provide
a "home" for desired savings.

But as some of the discussion of "real savings" (in something
like a house) and of purcdhases of foreign securities, etc.,
has indicated, would-be investors who are "afraid" of investing
today have multiple ways to hoard.  This may even take the
form of expenditure.  Reports  once upon a time from the Brazilian
hyperinflation indicated that some (wealthy) people would buy
a Mercedes, cover it in plastic, put it up on bricks in the
back yard.  Either the Mercedes is seen as a fungible good
(the depreciation being less than the inflation in the
currency in some "real terms") or else, perhaps, inflation
is inciting people to purchase today what they might otherwise
purchase tomorrow, trying in effect to cram several years
of purchasing into the present before buying power is lost.
Inflation is a true Gesell tax in this kind of environment.

Among business hoarders (& there are many), safe deposit
boxes full of 100s are a way to avoid taxation, and the
loss of purchasing value of 30--5% per year, and forfeited interest,
is lirttle in comparison  to the potential sales impact.  In an
hyperinflationary environment these people would probably
dishoard in favor of highly fungible commodities such as
diamonds or gold.  (indicating a rise in inflation beyond
a certain point might generate further inflation by
triggering dishoarding)

All of which is to make the point that the currency unit
itself is a non-problematic component of "hoarding and
the desire to save", and there are significant elements of
the population for whom the offer of Treasuries would not
satisfy the desire to save.  Especially insofar as cash
transactions offer escape from taxation, a rise in taxation
at the margin might increase hoarded cash funds and contribute
to economic contraction.  No doubt the movements between
cash holdings/deposits/ and securities would be complex.
I also don't know what the monitoring elements are of
transferring securities such as stock ownership are in
terms of tax repercussions.

In any case, I have had extensive expereince with
petty bourgeois owners and employers and can report with
confidence that the more exacting taxation requirements can
become the greater there is a tendency for two-book businesses
to arise, and within such businesses cash hoards become
part of the stock of capital with which business is
conducted.  This is a form of "savings demand" which has
very little relationship to the potential offer of Treasuries.
The M1 measurements indicate a large quantity of large
bills out there; not all of them are abroad or in the drug
trade (itself a major industry/employer).   These cash
hoards are sensitive to the level of taxation (inversely)
and the intensity with which taxation is enforced (i.e.
audits).  Very high rates of inflation might force them
into other media; but it would be a significant error
view unemployment effects resulting from such hoarding
as a demand for Treasuries.  Indeed, in a business
in which say 50% of total business volume is "on the
books" and another 50% "off the books" and financed
by cash, an expansion of business will increase the demand
for cash; this means an increase in withdrawals form the
banking system and a change in the net deposit situation.

Thus paradoxically a need to expand investment could
in this sector contract the overall lending capability
of the banking system; it might "signal" an increase
"in desired savings" at the macro level while, at the
micro level, it was intended to finance investment.

Since I think it is something like 33-40% of M1 which
is held in green physical cash it would be worth
considering the effects of underground and also
the more common "dual book" businesses (which have
a certain amount of activity that can be audited and
a certain amount of activity shielded from same) on
the "demand for net financial assets" argument.  I
think the effects of the underground or dual book
sector might be perverse from the point of view of
some of the ideas set forward so far.

greg nowell