Re: Creditary Economics (CE)

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

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 <pkt@xxxxxxxxxxxxxxxx>; Fri, 13 Apr 2001 18:09:54 -0600 (MDT)
On Fri, 13 Apr 2001 17:09:39 -0700, John O'Donnell
<jackodonnell@xxxxxxxx> wrote:

>Unfortunately, many economists ignore this tautological
>certainty and believe that they can force interest rates
>down by introducing too much money and/or credit. The fact
>remains that all they do by this process is lower the
>insignificant interbank rate and add to the uncertainty of
>the future value of money thereby causing an increase in the
>inflation premium portion of meaningful interest rates and,
>if the inflation rate itself increases, also increase the
>inflation premium. Just check on the recent response of 10
>and 30 year treasuries to the lowered target for fed funds
>-- they've gone UP NOT DOWN! When the fed increased the fed
>funds rate these meaningful rates went down. Now go figure
>the foolishness of these "experts."

Sheila Dow has a simple little diagram that illustrates the
liqudity preference argument.

It seems that most of the debate on "Creditary Economics"
is between exclusively focusing on horizontal money generated
by leverage in the financial sector and exlusively focusing on
vertical money created by requirements for payments to government.
"All money is debt", in the vertical/horizontal argument, would
necessarily apply to all horizontal money, since it is created
through leverage on vertical money.  However, the characteristics
of vertical money can vary from place to place and era to era,
from reserve accounts with a central bank to tallies indicating
that the year's gain tribute has been paid to the temple.


Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx