----- Original Message -----
From: "John O'Donnell" <jackodonnell@xxxxxxx>
To: <vze288fn@xxxxxxxxxxx>
Cc: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>; "pkt" <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, February 25, 2003 9:10 AM
Subject: Re: [gang8] Re: [A-List] US Dollar Standard: Deficits Do Matter
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.
--
-- jbod
Tax Privilege, Not People
___________________________________________________
Come visit and see a new economic perspective --
http://www.geocities.com/CapitolHill/1067
Comments/arguments welcome.
.