Re: [gang8] Re: [A-List] US Dollar Standard: Deficits Do Matter

["John O'Donnell" <jackodonnell@xxxxxxx>]

vze288fn@xxxxxxxxxxx wrote:

> Jack:
>
> Thanks, again.
>
> What is the ANALYTICAL import of relating Credit Ceilings to HPM rather than, say, to Bank Capital?
Just a choice that has been made in creating the fed. Many [most?]
others do use capital as the limiting function. Given my druthers,
capital would be my choice. [See "Can It Be?" at:
http://www.geocities.com/jackodonnell.geo/canitbe.html

> If the answer is NONE, why should HPM be viewed as an essential rather than contingent attribute of a given monetary system?
HPM is the capital required for using a capital ratio to limit credit
expansion and the promise given is a promise to pay HPM. Rather
difficult to promise to pay without specifying what is to be paid and
expect acceptance of the promise.

> Or, to put the point differently, why should Monetary THEORY be predicated on non-essential technical means of Aggregate Credit Control?
Also rather difficult to have a monetary theory without money, otherwise
known as HPM or the real stuff.

> > From: John O'Donnell <jackodonnell@xxxxxxx>
> > Date: 2003/02/25 Tue AM 07:26:53 CST
> > To: vze288fn@xxxxxxxxxxx
> > CC: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>,  pkt <pkt@xxxxxxxxxxxxxxxx>,
> > "TheNewForum@xxxxxxxxxxxxxxx" <TheNewForum@xxxxxxxxxxxxxxx>
> > Subject: Re: [gang8] Re: [A-List] US Dollar Standard:  Deficits Do Matter
> >
> > vze288fn@xxxxxxxxxxx wrote:
> >
> >
> >
> > > Jack:
> > >
> > > Thanks - but I remain befuddled.
> > >
> > > For I cannot perceive any analytical import in  mere LABELS (HPM and non-HPM)
> > > affixed to the different kinds of stuff whereby the FUNCTION of Money is
> > > performed, either by Law or Convention, at different times and places (HPM,
> > > Bank Credit, Cows, Sea-shells etc.).
> >
> > Try this:
> >
> > Let's say you have 10 bucks in your pocket and lend them to me. I in turn lend the 10 spot to my neighbor. Counting bank credit is like counting the original $10 plus the $10 IOU plus the $10 my neighbor owes me all as money. Recognize there is no limit to the number of times this one 10 spot can be loaned and that therefore there is no limit to the expansion of the supply of credit/money.
> >
> > That is why there are "required reserves" or "required capital ratio" to limit banks multiplication of credit expansion. Without some restraint other than the possibility of a bank run there would be a substantial lack of trust as some banks would [as they have in the "free banking" past] simply extend credit without sufficient backing and then go out of business when a run develops costing depositors all their savings.
> >
> > While the debt obligations can, at least among friends, be exchanges as if they were money they obviously are not true money. Bank credits are essentially the same thing. They are promises to pay money, not money itself. However, because bank promises are made by a [usually] trusted third party they are more generally accepted but they still are not the same stuff that is promised to be paid. They mat act as if they are equivalents but when push comes to shove they are not.
--


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