Re: the share held by banks

[eo200@xxxxxxxxxxxxxxxxxxxx]

> Kazuhiro Kurose wrote:
>
> > Mosler
> >
> > >  Good point!  I see no evidence that loans are hard to come by in Japan
> > >  due to bank capital constraints.  There is no 'credit crunch' so
> > addressing
> > >  bank solvency, though certainly a good idea, should not be expected to
> > >  materially alter the rest of the economy.
> >
> > Thank you for your response, and only you agree with my opinion. I think as
> > follows. Pure theoretically,.if one is Post Keynesian, one can't agree with
> > the article that the share prices held by banks constrain their ability to
> > lend. In Post Keynesian endogenous money approach, what constrains the
> > lending is not any items of the balance sheet, but the demand for bank
> > credit and the expectation of banks toward the future. That is to say, banks
> > can't lend without the demand for the credit, or even if there is the demand
> > for it, banks can't lend in the circumstances that the expectation toward
> > the future deteriorates. Anyway, in both cases, the bank lending can't be
> > constrained by any items of the balance sheet. Then I think that Japanese
> > emergency economic package makes no effect to the real output or employment
> > and so on.
>
> It's true that banks can't lend without demand from borrowers.
> But the banks in Japan that need rescue by the government are
> merely acting as intermediaries between the tax payers and the
> borrowers.  Until they are returned to solvency, they are wards
> of the government and can hardly be called banks.
>
> William F Hummel

Williams analysis is correct only if private borrowing is
seen as being socially equivalent to public borrowing,
which they are not. This false equivalency arises when
money is identified with liquidity.

Harry Veeder