esact at selway.umt.edu
02-22-1995, 10:10 AM
in 'the essential nature of money', _earth island j._, w '95, p.35, thomas h
grecco jr. says:
"unlike savings banks, s&l assoc's and thrifts, that primarily can only
lend out money that has been deposited, commercial [usa] banks actually
create something out of nothing & put it into circulation.
"as the federal reserve itself describes it, '(all bank deposits,
originally) come into existance as banks extend credit to customers by
exchanging bank deposits for the various assets banks acquire.'
"commericial banks lend something that they create out of nothing, and
then require that the "borower" pay interest for the privelege."
my querry: many folks recall from macroeconomics 101 class that bank
lending is a major way of creating money, and that assets for banks are
the money they lend out. do you accomplish expanding the money supply as
simply as by lending more than the deposits you take in? where does the fed
fit in, with their methods of creating money (buying paper notes or bonds
for cash 'credits' to member commercial banks; other methods?).
i have heard that s&l's also can create money: by lending out bundled fhma
mortages, or some such way--does anyone know about this method, and how large
it is in comparison to the commercial banks?
this article made an excellent point, imo, that i hadn't heard before, or
at least not expressed so clearly: it's inherently inflationary to
divorce fiscal and monetary policy if you leave fiscal policy (ie the
federal budget) in the hands of people w/out the responsability of
ensuring the currency has at least some value, but who do have a
"responsability" to provide benefits to their consituency, and who suffer
the penalty of loss of power if they don't.
it's not that i'm a strict monetarist--eg i believe that guarding the value
of the currency largely benefits those already with money--those whose
income and wealth has exploded, while the rest of society's has begun to
shrink (especially since the '80's, there are no more mom's left to enter
the workforce to maintain incomes). otoh, i've read some pretty horrible
descriptions of what life is like in a society that is trying to use a
currency that has no value.
as an environmentalist i deplore the role money plays in facilitating
consumption. john kenneth galbraith said in _the affluent society_ that
once we switched our manufacturing capacity over, by late '42, we could
have won ww2 "with one hand tied behind our back"--that we were the 1st
society not to suffer *any* significant consumer deprivations during a full
scale war. (being head of price & wage controls at the time, he should know].
clearly technology, expressed as mass production, has transforemed us!
while the size of the money supply has closely tracked the size of the
economy (gdp) for many decades, i've always wondered how we managed to grow
the economy from $1 or $2 trillion to $6 trillion in 20 or 30 short years.
ie, is our economy really worth $6t, or is it full of *hidden* inflation:
too many consultanting professionals and corporations charging a lot for
almost no service, goods recorded sold at full price when there was some
kind of unrecorded return fee or service, income from speculative assets
(ie some of the financial markets) that aren't worth anywhere near their
paper value, income from excessive govt. deficit spending, ... ... ?
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
tony tweedale |TEMPERATE BUT ENDANGERED PLANET.
recycle missoula, inc. |ENJOYS WEATHER, NORTHERN LIGHTS,
224 e. pine st (2) |CONTINENTAL DRIFT. SEEKS CARING
missoula mt 59802-4541 |RELATIONSHIP WITH INTELLIGENT LIFE
tel.: 406-542-1709 |FORM. (Friends of the Earth)
internet: esact@selway.umt.edu
This post transferred from the cdb-l mailing list
grecco jr. says:
"unlike savings banks, s&l assoc's and thrifts, that primarily can only
lend out money that has been deposited, commercial [usa] banks actually
create something out of nothing & put it into circulation.
"as the federal reserve itself describes it, '(all bank deposits,
originally) come into existance as banks extend credit to customers by
exchanging bank deposits for the various assets banks acquire.'
"commericial banks lend something that they create out of nothing, and
then require that the "borower" pay interest for the privelege."
my querry: many folks recall from macroeconomics 101 class that bank
lending is a major way of creating money, and that assets for banks are
the money they lend out. do you accomplish expanding the money supply as
simply as by lending more than the deposits you take in? where does the fed
fit in, with their methods of creating money (buying paper notes or bonds
for cash 'credits' to member commercial banks; other methods?).
i have heard that s&l's also can create money: by lending out bundled fhma
mortages, or some such way--does anyone know about this method, and how large
it is in comparison to the commercial banks?
this article made an excellent point, imo, that i hadn't heard before, or
at least not expressed so clearly: it's inherently inflationary to
divorce fiscal and monetary policy if you leave fiscal policy (ie the
federal budget) in the hands of people w/out the responsability of
ensuring the currency has at least some value, but who do have a
"responsability" to provide benefits to their consituency, and who suffer
the penalty of loss of power if they don't.
it's not that i'm a strict monetarist--eg i believe that guarding the value
of the currency largely benefits those already with money--those whose
income and wealth has exploded, while the rest of society's has begun to
shrink (especially since the '80's, there are no more mom's left to enter
the workforce to maintain incomes). otoh, i've read some pretty horrible
descriptions of what life is like in a society that is trying to use a
currency that has no value.
as an environmentalist i deplore the role money plays in facilitating
consumption. john kenneth galbraith said in _the affluent society_ that
once we switched our manufacturing capacity over, by late '42, we could
have won ww2 "with one hand tied behind our back"--that we were the 1st
society not to suffer *any* significant consumer deprivations during a full
scale war. (being head of price & wage controls at the time, he should know].
clearly technology, expressed as mass production, has transforemed us!
while the size of the money supply has closely tracked the size of the
economy (gdp) for many decades, i've always wondered how we managed to grow
the economy from $1 or $2 trillion to $6 trillion in 20 or 30 short years.
ie, is our economy really worth $6t, or is it full of *hidden* inflation:
too many consultanting professionals and corporations charging a lot for
almost no service, goods recorded sold at full price when there was some
kind of unrecorded return fee or service, income from speculative assets
(ie some of the financial markets) that aren't worth anywhere near their
paper value, income from excessive govt. deficit spending, ... ... ?
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
tony tweedale |TEMPERATE BUT ENDANGERED PLANET.
recycle missoula, inc. |ENJOYS WEATHER, NORTHERN LIGHTS,
224 e. pine st (2) |CONTINENTAL DRIFT. SEEKS CARING
missoula mt 59802-4541 |RELATIONSHIP WITH INTELLIGENT LIFE
tel.: 406-542-1709 |FORM. (Friends of the Earth)
internet: esact@selway.umt.edu
This post transferred from the cdb-l mailing list