Money Stock = Total Domestic Debts - Theory of Debt Money vs MMT - - - PowerPoint PPT Presentation

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

Money Stock ≈ Total Domestic Debts

• Theory of Debt Money -

Kaoru Yamaguchi & Yokei Yamaguchi

Social Sciences University of Ankara Japan Futures Research Center

International Conference on Economics

• Set. 5, 2019

at Baskent University, Ankara, Turkey

Today’s talk is based on the following presentation:

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

Interest-free At Interest

Classification of Money

Public Money

l Public institutions (such as Congress, government, kings & queens, emperors, etc. in old days) issue. l Interest-free at issuance. l One-time seigniorage belongs to the issuers.

(For example, 500 yen Japanese coin costs 43 yen: that is, seigniorage of 457 yen goes to the government ).

Debt Money (MMT)

l Private central banks (and banks) issue banknotes at interest, which becomes bankers’ income. l Private banks create deposits (credits) out of nothing at interest, which becomes bankers’ income. l Government debts create deposits out of nothing at interest, which becomes bankers’ income (MMT). l “Means of control” by bankers over borrowers.

Legal Tender (Fiat Money)

• 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)

Functional Money (Deposits and Gov. Debts)

• Masaaki Shirakawa (former governor of BoJ)

“Bank deposits function as money”

• Gold and Silver have functioned as money.
• MMT: sovereign currency (= gov. debts) functions

as money

“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. 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.”

A quotation from Irving Fisher’s 100% Money (1945, 3rd Edition).

A Foreword by Robert H. Hemphill

as well as Government debts Money Stock = Total Debts Households, Firms and Government

Definition of Debt Money

M0 Mf M1 MT M3

1,405 tril. Yen (100%) 800 tril. Yen (57%) 605 tril. Yen (43%) 313 tril. Yen (22%) 487 tril. Yen (35%)

Coefficient Correlation Analysis by Python

Our Main Findings: M3 = Total Domestic Debts MT (Savings) = Private Debts M1 = Government Debts

M

3

( l i n e 1 ) = T

• t

a l D

• m

e s t i c D e

b t s ( l i n e 2 )

MT ( l i n e 4 ) = P r i v a t e D

• m

e s t i c L

• a

n s ( l i n e 3 ) M1 ( l i n e 6 ) = G

• v

e r n m e n t D e b t s ( l i n e 5 ) 1,405 tril. Yen (M3=100%) 605 tril. Yen (MT=43%) 800 tril. Yen (M1=57%)

Our Main Finding: M3 = 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 ?

Private (Firms and Households) Loans PP&E Investment and Housing Investment GDP Growth Time Deposits

Textbook Keynesian Logic Got Reversed !

・Private Loans à Investment à GDP à Savings MT (line 1) = Private Domestic Loans (line 2) 605 tril. Yen (MT=43%)

GDP

Time Deposits (Households) Time Deposits (Households)

How Government Debts (and M1) Affect GDP ?

Government Debts Increase in M1 No GDP Growth

600 tril Yen

Textbook Keynesian Fiscal Policy Failed !

・G Debts à Spending à M1 Increases à No GDP Growth

M1 (line 1) = Government Debts (line 2)

GDP

800 tril. Yen (M1=57%)

Comparison: How Private and Government Debts Affect GDP ?

Private loans become 2.992 times more efficient

Multiple Linear Regression

Private loans become 3.904 times more efficient

Keynesian Fiscal Policy of Government

Expenditures is not so efficient !

How M0 byQE Policy Affect GDP ?

M1=800 tril. Yen

GDP

M0 = 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 ?

OMF (Overt Money Financing) by Adair Turner (Increase Reserves à100%?)

MMT: Sovereign Currency

MMT in action failed to be a Savior for Japanese Economy ! Can MMT Save America by introducing Green New Deal ?

Mainstream & Keynesian: S > I à Fiscal Policy à Crowding Out à interest up

• 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.

• 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

MMT cannot Solve Four Major System Design Failures

A Public Money System

• American Monetary Act -

1. Public Money Administration (Government) Issues Money 2. 100% Reserve （Abolishment of the Credit Creation）

• 3. Money as Public Utility

for the Economic Growth and Public Welfare A Debt Money System

• Money out of Nothing -

1. Privately-Owned Central Bank issues Money (Notes) 2. Credit (Deposits) created by Commercial Banks (A Fractional Reserve Banking System)

• 3. Monetary Control

by (and for) the International Bankers

What is Public Money System ?

Public Money Administration (PMA)

in Case of Japan

Ministry of Public Money Minstry of Finance Public Money Administra

• tion

9 Administration Members (Ph.D.

• r Equivalent)

Diet To Issue Public Money Chaired by the Minister of PM Public Money Executi ves Bank of Japan Public Money Vault Dissolve and Transit Recommend 3 members Recomment 3 members Public Money Mint Demand Side Supply Side Vice-chair (Supply Side) Vice-chair (Demand Side)

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 Japan

established in July 2018

https://public-money.info

(English Web Site coming soon)

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 u Public Money Forum Canada u Public Money Forum ・・・・・ u Public Money Forum ・・・・・ u Public Money Forum ・・・・・ You are welcome to

• rganize

Local- National Forum

Thank You For Your Attention!