Part 1: My Questions to L. Randall Wray on the Money Multiplier

I left the following comment here, "EconoMonitor : Great Leap Forward » Krugman Rediscovers the Wheel: Commercial Banks As Creators of Money," but it didn't tell me it was pending approval or in moderation and hasn't shown up yet:

Tom Usher

Tom Usher

UPDATE: I left the comment again with the explanation that I had, had javascript off for the site. The comment is, as of the time of this update (some 16-17 hours after my initial attempt), pending approval.

In addition (while I'm updating) and in case you don't know, according to the website:

L. Randall Wray is a Professor of Economics at the University of Missouri-Kansas City and Senior Scholar at the Levy Economics Institute of Bard College, NY.

Here's the original body of my initial comment, which has remained the same for my second attempt:

Hi Randy,

The Fed does still require 10% regular reserves against bank loans made/outstanding. What's the 90% if not a multiple?

Don't you think that the real reasons the Fed hasn't been able to cause inflation are 1) it's been paying interest on excess reserves and 2) the deregulators killed Glass-Steagall so that now the banks move their hot money where ever rather than concentrating on the traditional "conservative" lending they used to do?

If the Fed were to charge interest on excess reserves and if Glass-Steagall were reinstated, don't you think the banks would cause excess reserves to move into regular reserve accounts by way of lending newly created money that would then represent that 90% mentioned above?

I like reading your stuff and listening to your talks, but I've never really seen or heard you put this to rest.

I've read Steve Keen and others and like that too, but I'm never convinced by the arguments or points given that the multiplier doesn't exist. Until someone makes a really clear and convincing case that it doesn't exist, I will continue to maintain that it does for the reasons I mentioned above.

I'm open to proof it doesn't exist.

Perhaps we are speaking past each other and you mean in the practical sense only: in the sense that it is not now being utilized (much if at all).

Even knowing that, that's your position would be an improvement for me in trying to understand why you insist it doesn't exist.

At this point, I feel that the multiplier is still in use but is playing a very much smaller role than it probably ever has before by magnitudes of order.

Any light you shed on this whole subject will be appreciated.

Aside from this one aspect, I'm fully on board with MMT as the best explanation for how our mixed-economic system works.

Ideologically, I'm probably less patient than you are concerning what the government should do: full, permanent employment and high-skills training -- just what the New Deal fell short on.



Part 2


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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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