General Theory Seminar--Moore (reply to Mosler)

[mike sproul <msproul@xxxxxxxx>]

Warren:

By 'green money' I meant what is commonly called base money: coins,
cash, and reserves. I would definitely not include Treasury securities.
To use your bean analogy, there are base beans (actual beans) and
derivative beans (claims to beans, or 'open interest'). If a trader
issues a 'derivative bean', then that is his liability. In no sense do
Treasury securities substitute for derivative beans. The trader might
own some T-bills as his asset, and some of those T-bills might even back
his issue of derivative beans, but they are not part of open interest in
beans. Neither are Treasury securities part of open interest in base
money.

"Just like buying of bean futures can raise both the spot and forward
price of beans borrowing to make purchases can drive up prices."--Mosler

ANSWER: you forget that every purchase of beans is also a sale. Open
interest in beans can be large or small without affecting the price of
beans.

I don't follow your meaning when you say "the price level is a function
of prices paid by govt..."

I'm probably the same Mike Sproul you remember. I don't think there's
another one in the econ profession, and I did send around a paper on the
real bills doctrine a few years ago.

--Mike Sproul