Re: financing, funding, etc

[Warren Mosler <mosler@xxxxxxxxxxxxxx>]

>
> Although the US Constitution gives Congress the
> power to control the money
> supply -- as long as Congress does not want to print
> money directly (and if it
> did[as during the US Civil war when "greenbacks were
> printed"] the money
> printed would be an IOU of the government--
>
> In the absence of "printing greenbacks, thendeficit
> spending requires the US
> Treasury to issue an IOU  to some one-- be it the
> public or the Federal
> Reserve.

Yes, but this falls into the category of 'self imposed
constraint.'  That's like lacing your shoes together
then saying you can't run.

Other self imposed constaints include Congressional
debt limits, etc.

> >>PAUL: That is strange condsidering Warren Mosler's
> argumen t that if the
> >>government
> >>runs a deficit [FISCAL POLICY} it is to provide
> financial assets to savers
> >>who
> >>want to increase their holdings of financial
> assets.
>> Interesting point. Can you give an example of the
> federal government running a
> deficit and not issuing either "greenbacks" or any
> other government debt
> paper?

Sure, Japan deficit spent 20T yen which it leaves
as excess reserve balances in member bank accounts
at the BOJ.  These are simply deposits best understood
as balances credited by the BOJ as payment by the MOF
when it (deficit) spent.


>
>
>>
> If everyone in the private sector suddenly "is not
> happy" with its portfolio
> and they decide they want to "liquidate" , say,
> their stock market holdings to
> obtain cash to spend on goods and services ,-- i.e.,
> when the bubble bursts--
> where does the public get these funds equal to the
> value of their portfolio
> before the bubble bursts?

First, they will not get funds equal to 'valuations'
before the bubble burst, by definition.

When someone sells secs, funds come from the (non
govt) agent who buys them.
The total shares outstanding remains the same.
Funds exchange hands.  Prices fluctuate as buyers and
sellers interact.

 Or are you saying that if
> the central bank moves in
> and buys up all the equities offered to sale at the
> last price before the
> bubble burst, then it is monetary policy tha has
> provided the iquidity
> desired.

I'd call that fiscal policy, looking at it
functionally, even though the cb does it.
A loan from the cb would be closer to monetary
policy in my book, but the line is blurred under
close examination.

 If the latter is what you are saying, then
> why don't you say it?
> Of course it is the function of the central bank to
> take care of liquidity!

The cb is permitted to do this, not specifically
required best I can determined, and it usually
involves its lending function.

Warren

>
> paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> phone # (561)369-1951; fax #(561)369-1951;
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>
>


=====
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