Re: fiscal deficit - Mosler addendum

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> > So long as the Monetary Authority 'supplies' High Powered Money in any
> > amount 'demanded' by credit-creating institutions for 'clearing'
purposes,
> > the 'functional monopoly' in question is one of form rather than
substance.
>
> Unlimited, unsecured lending would quickly render the currency valueless.
> 'Secured' federal lending demands collateral in exchange for units of its
> currency
> thereby supporting the value of the currency.

The 'value of the currency' denotes its purchasing power in terms of
non-financial assets - 'secured' federal lending whereby HPM is supplied in
exchange for some other form of money/assignable debt does NOT affect "the
value of the currency".

Gunnar


----- Original Message -----
From: "Warren Mosler" <mosler@xxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Monday, November 19, 2001 7:57 PM
Subject: Re: fiscal deficit - Mosler addendum


>
>
> Gunnar Tómasson wrote:
>
> > Re. the following:
> >
> > > A currency with a floating exchange rate 'works' because it is
> > > functionally a (public) monopoly. The state/issuer controls the
> > > 'supply' via spending/lending and the 'demand' via taxes, fees, etc.
> > > payable in its currency of issue.
> >
> > Comment:
> >
> > So long as the Monetary Authority 'supplies' High Powered Money in any
> > amount 'demanded' by credit-creating institutions for 'clearing'
purposes,
> > the 'functional monopoly' in question is one of form rather than
substance.
>
> Unlimited, unsecured lending would quickly render the currency valueless.
> 'Secured' federal lending demands collateral in exchange for units of its
> currency
> thereby supporting the value of the currency.
>
> This is covered in more detail in 'A General Framework for the Analysis of
> Currencies
> and Other Commodities' at:
>
> www.mosler.org
>
> >
> > For it reduces the 'functional' role of HPM in monetary management to a
> > level commensurate with that of Candidate Gore's Lockbox in the
management
> > of the social security system - that of functionless window-dressing.
> >
> > Gunnar
> >
> > ----- Original Message -----
> > From: "Warren Mosler" <mosler@xxxxxxxx>
> > To: <pkt@xxxxxxxxxxxxxxxx>
> > Sent: Sunday, November 18, 2001 12:29 AM
> > Subject: Re: fiscal deficit
> >
> > >
> > >
> > > Gunnar Tómasson wrote:
> > > >
> > > > Re. the following:
> > > >
> > > > > (1) The notion that the value of the currency is determined by the
> > prices
> > > > > government pays strikes me as circular or tautological.
> > > >
> > > > Agree - the like argument applied to money in the form of IOUs
issued by
> > > > entrepreneurs to suppliers of factor services is that the value of
such
> > > > money/IOUs is determined by the prices paid by entrepreneurs (i.e.,
the
> > > > nominal value of their IOUs issued by entrepreneurs to suppliers of
> > factor
> > > > services).
> > > >
> > > > Gunnar
> > > >
> > > The single supplier is necessarily 'price setter.'
> > >
> > > A currency with a floating exchange rate 'works' because it is
> > > functionally a (public) monopoly. The state/issuer controls the
> > > 'supply' via spending/lending and the 'demand' via taxes, fees, etc.
> > > payable in its currency of issue.
> > >
> > > It's all elementary micro stuff.
> > >
> > > see 'A Framework for the General Analysis of Currencies and Other
> > > Commodities'
> > > and 'Full Employment AND Price Stability' at www.mosler.org
> > >
>
> --
> Warren Mosler
> Director of Economic Analysis
> III Finance
>
> http://www.mosler.org
>
>
>