Re: Mosler seminar: Tax-driven currency and the motives for credit

["John Gelles" <jjgelles@xxxxxxxx>]

	Per Berglund's story is told below in words I do
	not use as he does:

	You borrow to buy a home if you have not enough
	cash.  Net worth has nothing to do with it. (Your
	net worth can be in non-cash assets, such as land or
	ownership interest in a business, etc.)

	The lender of the cash may be a bank that is allowed
	to create it by law or borrow it from a depositor with
	extra cash.  (The depositor may even have negative
	net worth.)

	Mosler and Forstater refuse to consider WHY we
	do not expand fiat money to its inflation-imposed
	limit as we, as a nation, employ it to motivate
	production of things we do not have.  The reason
	is the political strength of people who believe that
	their taxes will be increased to carry the added fiat
	money with interest charges or repay (recall) it outright.

	As you can see, money is tax-fear constrained not
	tax-anticipated enhanced in value.


        John Gelles: Vote for an Individual Estate Account (IEA)
        jjgelles@xxxxxxxx                http://www.rain.org/~jjgelles/
        Modern nations cannot afford poverty, it costs too much.
        Its price is the money  the poor don't spend  that the rest
        would earn if they did.  If those with the least spent what
        it takes for a decent life, the rest would all have more for
        a grander one. That is  the nature of  production and free
        enterprise  protected  from monopoly  by law, and  from
        deflation and inflation by  individual indexed savings held
        in tax free accounts to create a controlled flow of money.
       [All the above equals an Individual Estate Account (IEA)]

----------
From: Per Gunnar Berglund <pgb@xxxxxxxxxxxxxxxxxx>
To: POST-KEYNESIAN THOUGHT   <pkt@xxxxxxxxxxxxxxxx>
Subject: Mosler seminar: Tax-driven currency and the motives for credit
Date: Saturday, June 06, 1998 3:32 AM

Warren's latest comment leaves me unsure about
whether he has got my point or not. I suspect that
it is his preoccupation with the zero net of private
credit that makes him overlook the importance of
the gross.

Let me resort to the example of house mortgaging
once more. The borrower takes a mortgage because
his own net worth is insufficient to buy the house
right away. The lender (ultimately, via the bank
intermediary) has the opposite motive: his net worth
is greater than the value of the assets he can use or
employ profitably.

The credit arrangement is basically another way of
letting the dwelling. But instead of paying rent, the
'tenant' judicially owns the house and pays interest on
the mortgage.

The basic motive for the transaction is a disparity in
net worth as compared to the needs and uses of the
two parts. The lender owns more than he can use; the
borrower owns less than he can use. So, there is
clearly an economic potential here: welfare is increased
by the credit transaction. That, I think, is the chief motive
for credit, the basic reason why there is a "gross".

The net can easily be invoked as a "disequilibrium"
between the lending and borrowing conditions. Since the
net must be reflected by the "mirror" of the public debt
(less the foreign debt in the open economy setting),
the demand for the currency (including "stored currency")
may well be analysed in completely different terms than
future expected taxation.

Best,
Per

Per Gunnar Berglund
_______________________________________________________________
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