There was a painful discussion about Social Security on ‘This Week with George Stephanopoulos” this past Sunday. Paul Krugman endeavored to explain to several non-believers how it works (here at 10:40): http://abcnews.go.com/ThisWeek/video/week-roundtable-budget-battles-18696520 It’s not an easy explanation. One wonders how many times the issue has been discussed and not understood over the decades – and [...]

Introduction Some readers of Pragmatic Capitalism and Monetary Realism have been underwhelmed by the aesthetics of this equation: S = I + (S – I) This says that private sector saving consists of an amount required to fund investment I plus an additional amount (S – I). The structure of the equation is a tautology [...]

Introduction Loans create deposits. We’ve heard it many times now. But how well is it understood? The phrase is typically invoked accurately, in conjunction with a rejection of the ‘money multiplier’ fable found in economic textbooks. From an operational perspective, banks do not “lend reserves” to their non-bank customers. “Loans create deposits’ is an operation [...]

Here: http://krugman.blogs.nytimes.com/2013/02/10/still-says-law-after-all-these-years/ Still Say’s Law After All These Years “When John Maynard Keynes wrote The General Theory, three generations ago, he structured his argument as a refutation of what he called “classical economics”, and in particular of Say’s Law, the proposition that income must be spent and hence that there can never be an overall [...]

This is mostly for the potential benefit of Treasury and Federal Reserve operatives, in case they’re now seriously considering the operational implications of the platinum coin idea. I say this with tongue slightly in cheek, because both organizations obviously have highly qualified and brilliant experts in this area. This is just food for thought from [...]

Interesting discussions.   One way of looking at this is to consider analogous exit plans.   For conventional QE exit, the Fed must sell bonds into the market.   For platinum QE exit, the Fed must sell platinum back to Treasury.   The implication of this is that Treasury must refund its original platinum funding with [...]

If Treasury were to mint and then deposit a $ 1 trillion Platinum Coin at the Federal Reserve, its deposit account at the Fed would be credited with $ 1 trillion in new balances. One option might be for Treasury to buy back Treasury debt now held by the Fed (assuming appropriate available supply from [...]

Introduction The IMF recently published a working paper (August 2012) “The Chicago Plan Revisited”: http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf The authors are IMF staffers Jaromir Benes and Michael Kumhof. The views expressed are those of the authors, and not of the IMF. Accordingly, we will refer to this paper as the “BK Chicago Plan”. The original “Chicago Plan” is [...]

* This paper can also be downloaded in PDF format here.   By JKH Introduction About a year ago, a blogosphere debate erupted over TARGET2, the inter-central bank payment system for the Eurozone. Ground zero for that discussion was a blog post by Hans-Werner Sinn, followed by a more comprehensive paper: http://www.voxeu.org/article/ecb-s-stealth-bailout http://www.cesifo-group.de/portal/pls/portal/docs/1/1210631.PDF Sinn’s argument was [...]

Introduction – Fiscal policy includes federal spending on goods and services, taxing, and debt issuance. Monetary policy includes the management of a central bank that issues money claims to commercial banks, the Treasury, and the public. A sovereign state is responsible for fiscal and monetary policy, executed through treasury and central banking operations respectively. Fiscal [...]