Money Stock = Total Domestic Debts - Theory of Debt Money vs MMT - 15th Annual AMI Monetary Reform Conference University Center, Downtown Chicago, USA Zoom Presentation 10:00 AM (6:00PM Turkey Time) Oct. 5, Saturday 2019 by Prof. Dr. Kaoru Yamaguchi Social Sciences University of Ankara, Turkey Director, Public Money Forum Japan Disclaimer: Today’s presentation is of my personal views, not of the organizations we belong to
Today’s talk is based on the following presentation: Money Stock ≈ Total Domestic Debts - Theory of Debt Money - Kaoru Yamaguchi & Yokei Yamaguchi Japan Futures Research Center Social Sciences University of Ankara Set. 5, 2019 International Conference on Economics at Baskent University, Ankara, Turkey The updated paper is available as Working Paper No. 04-2019 at the Japan Futures Research Center: http://www.muratopia.net/research/papers/MoneyStock%20 =%20Debts-%28KY%29.pdf
Classification of Money
Classification of Money At Interest Interest-free
kings & queens, emperors, etc. in old days) issue. (For example, 500 yen Japanese coin costs 43 yen: that is, seigniorage of 457 yen goes to the government ). at interest, which becomes bankers’ income. nothing at interest, which becomes bankers’ income. interest, which becomes bankers’ income (MMT). Public Money l Public institutions (such as Congress, government, l Interest-free at issuance. l One-time seigniorage belongs to the issuers. Debt Money (MMT) l Private central banks (and banks) issue banknotes l Private banks create deposits (credits) out of l Government debts create deposits out of nothing at l “Means of control” by bankers over borrowers.
Aristotle(384-322 BC) “Money exists not by nature but by law” Circulation and acceptance is forced by law MMT: government debts are accepted as tax as if they are sovereign currency. (Albeit, currency as legal tender = coins + banknotes) “Bank deposits function as money” as money Legal Tender (Fiat Money) • • • Functional Money (Deposits and Gov. Debts) • Masaaki Shirakawa (former governor of BoJ) • Gold and Silver have functioned as money. • MMT: sovereign currency (= gov. debts) functions
A Foreword by Robert H. Hemphill “Neither the banker nor the borrower ordinarily realize that a loan just completed, is putting into circulation that much new money ... If all bank loans were repaid, no one would have a bank deposit, and there would not be a dollar of currency or coin in circulation. as well as Government debts This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit.” Money Stock = Total Debts A quotation from Irving Fisher’s 100% Money (1945, 3 rd Edition). Households, Firms and Government
Definition of Debt Money
1,405 tril. Yen (100%) M 3 8 00 tril. Yen M T (57%) 605 tril. Yen (43%) M 1 M f 487 tril. Yen (35%) M 0 313 tril. Yen (22%)
Coefficient Correlation Analysis by Python
Our Main Findings: M3 = Total Domestic Debts M T (Savings) = Private Debts M1 = Government Debts 1,405 tril. Yen (M 3 =100%) ) 2 e n i ( l s e t b D c i t s e m o D l a t o T = ) 1 e n i l ( M 8 00 tril. Yen 3 (M 1 =57%) ) 3 605 tril. Yen e n i l ( s n = a ) o (M T =43%) 4 L = 6 ) e e c l i n ( n i M 1 t i l s ( e 5 ) e m n M T ( l i s o b t D e t D n m e n e e r v G o t a v i r P
Our Main Finding: M 3 = Total Domestic Debts
Our Finding: MT = Private Domestic Loans
Our Finding: M1 = Government Debts
Japan’s Lost Three Decades (1991-2019) GDP Growth Rate 0%
How Private Loans Affect GDP ? 605 tril. Yen (MT=43%) Private Domestic Loans (line 2) M T (line 1) = GDP Time Deposits (Households) Time Deposits (Households ) Private (Firms and Households) Loans PP&E Investment and Housing Investment GDP Growth Textbook Keynesian Logic Got Reversed ! ・ Private Loans à Investment à GDP à Savings Time Deposits
800 tril. Yen How Government Debts (and M 1 ) (M1=57%) Affect GDP ? Government Debts (line 2) Government Debts M1 (line 1) = Increase in M1 600 tril Yen GDP Textbook Keynesian Fiscal Policy Failed ! No GDP Growth ・ G Debts à Spending à M 1 Increases à No GDP Growth
Comparison: How Private and Government Debts Affect GDP ? Private loans become 2.992 times more efficient Multiple Linear Regression Private loans become Keynesian Fiscal Policy of Government 3.904 times more Expenditures is not so efficient ! efficient
How M 0 byQE Policy Affect GDP ? M 1 =800 tril. Yen GDP M 0 = 487 tril. Yen QE Policies Failed ! ・ QE à M0 à No Increase in M1 and GDP
Summary: How Money Stocks (M1, Mf and M3) are Created and Affects GDP ? MMT in action failed to be a Savior for Japanese Economy ! Can MMT Save America by introducing Green New Deal ? MMT: Sovereign Currency Mainstream & Keynesian: S > I à Fiscal Policy OMF (Overt Money Financing) à Crowding Out by Adair Turner à interest up (Increase Reserves à 100%?)
MMT wiped out Mainstream Monetary Theory: • ”Money stock can be controlled by the Central Bank” Public Money and MMT support Debt Money Theory: • ”Money stock is endogenously created and destroyed” MMT assumes an integrated government (with CB) • as if government issues Sovereign Currency Yet, MMT policy is proposed under Debt Money System. • Hence, It cannot overcome four major system design failures of debt money.
MMT cannot Solve Four Major System Design Failures 1. Instability of Money Stock (Boom & Burst, Inflation & Recession Unemployment, etc) Observed in 1930’s during the Great Depression by Fisher (1935). 2. Accumulation of Government Debts 3. Income Inequality (between Financiers and Non-financiers) 4. Environmental Destruction
What is Public Money System ? A Debt Money System A Public Money System - Money out of Nothing - - American Monetary Act - 1. Public Money Administration 1. Privately-Owned Central (Government) Issues Money Bank issues Money (Notes) 2. 100% Reserve 2. Credit (Deposits) created （ Abolishment of the Credit by Commercial Banks Creation ） (A Fractional Reserve Banking System) 3. Money as Public Utility for the Economic Growth and 3. Monetary Control Public Welfare by (and for) the International Bankers
Public Money Administration (PMA) in Case of Japan Diet To Issue Public Money Vice-chair (Supply Side) 9 Administration Chaired by the Members (Ph.D. Minister of PM Vice-chair (Demand Side) or Equivalent) Public Money Recomment Recommend Administra 3 members 3 members - tion Ministry of Minstry of Public Money Finance Public Money Supply Demand Executi Side Side ves Public Money Public Money Vault Bank of Japan Mint Dissolve and Transit
https://public-money.info Public Money Forum Japan established in July 2018 (English Web Site coming soon) to promote a new monetary reform in Japan, supported by the ASD Macroeconomic Model, in the Age of Blockchain Revolution and Crypto-money Age
Public Money Forum World-wide as A New Monetary Reform Movement supported by the ASD Macroeconomic Model u Public Money Forum Japan (2018) u Public Money Forum UAS You are Thank You For Your Attention! u Public Money Forum Canada welcome to u Public Money Forum ・・・・・ organize Local- u Public Money Forum ・・・・・ National Forum u Public Money Forum ・・・・・
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