Nick Rowe replies to Richard Williamson re: full-reserve banking (emphasis mine): The key reading here (even though it appears to be about a different subject) is Milton Friedman’s “The optimum quantity of money”.Foregone nominal interest payments is a tax on holding currency…. 100% required reserves mean you impose the same tax on chequing accounts … […]

Richard Williamson asks a sensible and straightforward question: If, as Modern Monetary Theorists propose, banks’ reserve levels put no significant constraints on their lending, why don’t we have 100%-reserve banking — and presumably no runs on banks as a result?First an explanation — I hope simple, clear, and generally accurate (if simplified): Say you start […]

• Since Social Security started it has always brought in more money than was spent. It contributes a surplus to the total federal budget. That’s true today and will continue for quite some time.• The extra revenue needed to make SS solid far beyond the foreseeable future (75 years) is tiny: 0.6% of GDP.• A […]

A while back I pointed to (and demonstrated with not very pretty pictures) Randall Wray’s rather stunning observation: every depression in American history was preceded by a large decline in nominal federal debt. And I puzzled about why this wasn’t true of our latest little…event:   We saw a decline leading up to 2000, but […]

I haven’t posted on Nick Hanauer and Eric Liu’s stuff, and I should have, long ago. Nick, along with Bill Gates Senior, was one of the big proponents of the Washington State high-earner income tax initiative a while back (which failed utterly, I’m sad to say). As was I, in my little way. I think […]

Eric Brynjolfsson and Andrew McAffee have a new Kindle instant book out, Race Against the Machine, that very nicely describes the issues related to technological unemployment. It’s well-written, content-packed, cogently argued, usefully hyperlinked, and well worth the $3.99 they’re asking.But I think there’s one crucial topic they don’t address, highlighted by the following.They deliver a […]

I think (after a lot of effort) that I’ve internalized Nick Rowe’s modeling of this question (follow links from here) pretty well conceptually. His answer is Yes. There have been thousands of posts and comments across the blogosphere since Nick took Krugman to task on the issue a couple of weeks ago, and Nick has […]

As (mis)conceived by most economists, money (which they confute here with currency) emerged as a solution to the time problem of barter economies: my spinach is ready now, but your apples won’t be ripe for months. How can we trade? Answer: you give me money for my spinach, and I give it back to you […]

Repeat as needed to avoid cognitive dissonance. “Trust” percentage minus “Distrust” percentage: Via: Chart of the Day: Republicans Don’t Trust Anyone (Except Fox News) | Mother Jones. Cross-posted at Asymptosis.

I’ve noticed that many others, like me, are puzzled by the mechanics of the Saving=Investment accounting identity. How do household savings get instantly and perfectly intermediated, in a period, into investment spending — the purchase/creation of long-term productive fixed assets? An Aha! for me: According to Krugman’s textbook, they don’t. First a correction: “The savings[sic]-investment […]