Does the US need a central bank (the FED)

[morganist]

You are not differentiating in what is classed as an excess reserve it is only a temporary surplus of funds that banks hold before lending out. In the United Kingdom it is necessary and helps banks to make profits and set the lending price they need. It is this mechanism in the United Kingdom that makes the bank competitive with other banks and makes some banks more successful than others.

A banks success in the United Kingdom may be more down to how it handles its ability to set lending prices competitively through this excess fund process, even though it may only hold on to these excess funds for a few days or even a few hours. I have figured out what you are missing in your understanding of the banking system, it is this ability to make a bank competitive with other banks by offering cheaper loans.

It is down to how they manage or handle the funds they borrow to lend out to customers and how this enables them to offer a more competitive price to other banks. You have taken price competition and the market for debt out of the picture. You are not taking into consideration what makes customers want to borrow from a bank, how the bank attracts it market share of lending and what it has to do to get that custom.

Does the reserve adjustment facility you explain enable American banks to compete with each other. The system in the United Kingdom does through providing opportunities to take advantage of low debt borrowing offers and then passing them on to the customer. Part of a banks success is how well they manage this function. Funding from borrowing at low prices enables this competition and having the money at a good price in advance helps it.

Further to my above commments. There is a reason why banks hold excess reserves and I know Piezoe thinks it something they should not do, but there is a reason why they do it. The first is they can't always shift the cheap debt they have borrowed straight away, they have to get custom to pass on the debt they have this involves advertising and competitive prices. It can take a while to shift the low priced borrowed funds they have in their excess reserves but they will hold it because they could borrow it cheaply and then it is a case of lending it out.

The second reason is there is a massive trade in the loanable fund market where banks can make money from trading the cheap loans they have between each other to then pass on to customers. Just the trading process with other banks of the excess funds the intial bank borrowed is a form of business. Rather than the customer being someone who borrows money from a bank it is another bank who borrows the funds at a higher price than the initial bank has to pay. Banks can make money from this turnover of buying low and selling high.

There is a whole market and business operation that is made possible by holding excess reserves. However the excess reserves are not a set figure held for a long time but a fast turnover of many trades made daily or hourly to make money 'playing' the loanable fund market. This is a business operation and kind of like a bank holding stocks or shares, you have to own them to be able to sell them at a profit. This whole mechanism makes the buying and selling of cheap debt, price setting and bank competiveness possible.

 

[morganist]

Most people, from vice presidents down, who work in banks haven't a clue how their Central Operates and controls the wholesale price of money.

I just got the book and I have read it. The point I was trying to make is explained in pages 47/48 onwards. This whole market is worth a lot to a bank and is a reason they will expand their excess reserves even if it is only for a short period.

The book does not really hit on the ability for the bank to be able to shift the debt they have which they will hold on to if it is low cost to make a profit by passing it on. This has been a massive change in the operations of banks with low central bank interest rates.

The book touches upon the price mechanisms that lead to lending although dismisses much of actual bank operations to achieve loan targets. This is a more modern movement in banking over the last decade or two so I might forgive the author for it.

I don't agree with the authors view of Fiat money which is described as a tax credit. I also feel he has neglected to see the money as an asset or commodity in its own right which people store for future use. Its value may change like any commodity but it is an asset.

I feel the author is ignoring the wider the economy and makes assumptions that are too limited for the economic system. It seems very much tax based and assumes all government income is either tax or debt and that the government is the driving force of the economy.

The understanding of inflation is also not really accurate by the definition which is an increase in price of buying a set basket of goods from one period of time to another. That is the position of inflation and attempts are made to control it.

Inflation is seen an excess of money within an economy - many economists would see it as a deficiency of goods and services and would try to maximise the supply of goods to reduce prices - more goods and services lower prices.

The book also neglects the impact exchange rates and currency prices has on the ability for nations to purchase goods and services. This may be a key factor and could be down to many different reasons - either way inflation is not just down to excess demand.

I also feel the book is lacking in its understanding of the impact inflation and interest rates have on the government debt and how much the government debt increases when either inflation or interest rates rise. It is dramatic and can easily be controlled.

Anyway in the United Kingdom it turned out that you can control inflation - economic growth - interests rates and makes government cost efficiencies through controlling pension saving and through pension reform. There is no need to alter the interest rate.

Lending rates could be set and should be set by the risk of the investment rather than the oversupply of cheap credit - this will reduce the risk of loss of investments which has been a massive problem. I will look at the book further but it does not explain the whole picture.

 

[piezoe]

I just got the book and I have read it. The point I was trying to make is explained in pages 47/48 onwards. This whole market is worth a lot to a bank and is a reason they will expand their excess reserves even if it is only for a short period.

The book does not really hit on the ability for the bank to be able to shift the debt they have which they will hold on to if it is low cost to make a profit by passing it on. This has been a massive change in the operations of banks with low central bank interest rates.

The book touches upon the price mechanisms that lead to lending although dismisses much of actual bank operations to achieve loan targets. This is a more modern movement in banking over the last decade or two so I might forgive the author for it.

I don't agree with the authors view of Fiat money which is described as a tax credit. I also feel he has neglected to see the money as an asset or commodity in its own right which people store for future use. Its value may change like any commodity but it is an asset.

I feel the author is ignoring the wider the economy and makes assumptions that are too limited for the economic system. It seems very much tax based and assumes all government income is either tax or debt and that the government is the driving force of the economy.

The understanding of inflation is also not really accurate by the definition which is an increase in price of buying a set basket of goods from one period of time to another. That is the position of inflation and attempts are made to control it.

Inflation is seen an excess of money within an economy - many economists would see it as a deficiency of goods and services and would try to maximise the supply of goods to reduce prices - more goods and services lower prices.

The book also neglects the impact exchange rates and currency prices has on the ability for nations to purchase goods and services. This may be a key factor and could be down to many different reasons - either way inflation is not just down to excess demand.

I also feel the book is lacking in its understanding of the impact inflation and interest rates have on the government debt and how much the government debt increases when either inflation or interest rates rise. It is dramatic and can easily be controlled.

Anyway in the United Kingdom it turned out that you can control inflation - economic growth - interests rates and makes government cost efficiencies through controlling pension saving and through pension reform. There is no need to alter the interest rate.

Lending rates could be set and should be set by the risk of the investment rather than the oversupply of cheap credit - this will reduce the risk of loss of investments which has been a massive problem. I will look at the book further but it does not explain the whole picture.

Read it again. Then read L. Randall Wray's, "Understanding Modern Money."

 

[morganist]

Read it again. Then read L. Randall Wray's, "Understanding Modern Money."

I might read it again, but I am sure that I will come to the same conclusion. The book definitely explains the reason why banks will hold excess reserves for short periods like I said to make money from the interest rate gap. I would say to you read it again because you have failed to appreciate the mechanisms and profit making business that banks use through excess reserves. The book states this process is worth $140 billion a year, when it was written on page 50. Then there is the whole element of being able to shift the debt, which is the reality of working at a bank.

I am not a fan of Mosler's work, he claims an involvement in the Italian economy and has stated his involvement in the Euro Zone. Both the Euro Zone and the Italian economy have been in difficulty as a result of the banking system and economic models they have used. Since switching to pension saving economic control in the United Kingdom the economic targets have been liked straight lines and the movement in expanding corporate bonds as an investment has stabilised the economy, corporate bonds are more secure than credit and pay more than treasuries.

I feel the big 'Don't Get It' is a failure to appreciate pension saving is a saving mechanism like the interest rate at the central bank. Rather than altering the interest rate alter pension saving, this has proven effective and cost efficient. Interest economic control is expensive to the Treasury and has also been ineffective. Do you remember the consequences of 15% interest rates in the United Kingdom, the defaults, business failures and house repossessions? There is a new movement in economics which has proven to work and I find hard to understand why you are pushing a failed banking and economic system.

 

[piezoe]

I'm not pushing anything.
I'm not even pushing reality. I'm only trying , but failing, to get you to stop posting nonsense.

 

[Overnight]

...
I also feel the book is lacking in its understanding of the impact inflation and interest rates have on the government debt and how much the government debt increases when either inflation or interest rates rise. It is dramatic and can easily be controlled...

Then it is time for you to write your own book on the subject, for the bookstands, rather than send out your ideas to foreign heads-of-state. You could be the new John Nash!

But somehow I think it will turn out to be the financial equivalent of "Null Physics", by Terence Witt.

 

[morganist]

I'm not pushing anything.
I'm not even pushing reality. I'm only trying , but failing, to get you to stop posting nonsense.

The banking system and economic model Mosler explains led to a financial crisis in 2007/2009. My work on the other hand has led to a decade of economic growth, low inflation, low interest rates, increase pension saving and massive treasury cost efficiencies. See below.

The Global Financial Crisis.

https://en.wikipedia.org/wiki/Financial_crisis_of_2007–08

My Work.

http://morganisteconomics.blogspot.com/p/success.html

 

[morganist]

Then it is time for you to write your own book on the subject, for the bookstands, rather than send out your ideas to foreign heads-of-state. You could be the new John Nash!

But somehow I think it will turn out to be the financial equivalent of "Null Physics", by Terence Witt.

I have written four books all of them have original policies in them which have been used by the government and proven to work. Below is evidence of the success of my work.

http://morganisteconomics.blogspot.com/p/success.html

 

[morganist]

Then it is time for you to write your own book on the subject, for the bookstands, rather than send out your ideas to foreign heads-of-state. You could be the new John Nash!

But somehow I think it will turn out to be the financial equivalent of "Null Physics", by Terence Witt.

The whole process of writing letters to heads of state and other people of power has led to the introduction of a successful new school of economic thought, which achieved all of the targets the government set. It has also made massive treasury cost efficiencies and increased pension saving. The letter writing has proven to be the most successful method of achieving overall economic prosperity and improvements in economic policy. It is the letter writing that has worked over other methods of communication, I recommend to anyone to write letters.

Since starting my school of economic thought in 2006, when I wrote the Pension Problem I have influenced politicians to reform pension saving to reduce treasury costs. The reform of Retirement Benefit Schemes which I lobbied for prevented the legalisation of embezzlement and saved billions of pounds. Since 2010 when the Conservative Party became the controlling party in the United Kingdom pension saving reform and pension regulation reform has been managed enabling the economic targets to be achieved, this is a massive success.

There has been 14 years of cost savings and reform of Retirement Benefit Schemes and 10 years of pension saving and pension regulation reform, which also made cost savings. In the last 10 years the British government has been using my school of economic thought that uses pension saving alterations to control economic growth, inflation and keep interest rates low in preference to interest rate alterations. The evidence is that for seven years in the United Kingdom the interest rate was the same, pension saving reform was significant. See below.

http://morganisteconomics.blogspot.com/p/success.html

I have given the world a whole new school of economic thought that seems to work. I achieved this four years after starting its development, there has been ten years of using my school of economic thought in which it has proven successful. I promote my work to make it available to other countries around the world that are struggling. It has proven successful at stimulating economic growth, controlling inflation, keeping interest rates low, increasing pension saving and reducing unemployment when the pension saving allowance fell.

 

[piezoe]

The banking system and economic model Mosler explains led to a financial crisis in 2007/2009. My work on the other hand has led to a decade of economic growth, low inflation, low interest rates, increase pension saving and massive treasury cost efficiencies. See below.

The Global Financial Crisis.

https://en.wikipedia.org/wiki/Financial_crisis_of_2007–08

My Work.

http://morganisteconomics.blogspot.com/p/success.html

Why not go ahead and post the letters you've received in response to your own letters. That could be quite revealing of the awe in which the Chancellor of the Exchequer holds your views.