Part 6: Ed Dolan's Econ Blog » Whatever Became of the Money Multiplier?

I like this article: EconoMonitor : Ed Dolan's Econ Blog » Whatever Became of the Money Multiplier?. It doesn't lean quite enough in the direction I've been suggesting, but it leave some room for a wide range of semantical understanding.

I believe I've been discussing the Multiplier as a theory that the Fed could still choose to exercise while others have been simply discussing the current practical lack of its application. With that, I'm fine provided it's understood that the "tool" remains there: exists.

EconoMonitor : Ed Dolan's Econ Blog » Whatever Became of the Money Multiplier?I wouldn't call it "dead" unless one wants to term it "resurrected" if and when it's more obviously used in the manner Ed Dolan and the others described that it used to be. I just think of it as a tool that either exists or doesn't. It's still there. One might rightly call it window dressing since the Fed keeps the requirement- and penalty-language links to the regulations "alive" on the Fed's site.

I still view it as a constraint to a small degree though after the fact and certainly not to the exclusion of the other types of "money" Ed and others have mentioned.

One earns money and then pays the tax. If one spends it all before that, the penalties ensue. If a bank under the Multiplier were to lend and then the Fed were to check for the reserves without the Fed having either lent them to the bank or expanded the reserves where the total system-wide reserves had already been reached and that bank were to come up short, the Fed could legally penalize that bank under the current rules. It's discretionary. The IRS can settle too.

Of course, it's a chummy club. The Fed may have issued a statement internal to the banks (confidential) that states that the Fed will not again apply the Multiplier.

It's hard to be a fan of their system. I'm not one. It's way too elitist.

Anyway, I think I've exhausted my point. I stand by it even while I understand how others don't view things exactly how I'm seeing them.

I don't think the discussion has done any harm. I believe I read in Dolan's article some deference for at least slightly dissenting opinions. He doesn't come off as smug at all. He doesn't come off as viewing those who are unfamiliar with the ideas as necessarily stupid or the like.

Thanks.

Update: September 27, 2013:

"There's a number of tools still at the Fed's disposal," including lowering the interest on excess reserves, he ["Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, a voter on policy next year"] said. The symbolism of such a move "could be relatively powerful" because it would provide evidence of the central bank's resolve to support the economy, he said.

Source: Kocherlakota Says Fed Must Do 'Whatever It Takes' for Growth

That's what I've been talking about. That would be applying the Money Multiplier in addition to forward guidance. He doesn't know what he's talking about? I think he does.

Update: Sept. 28, 2013:

To be clear, Kocherlakota said lower the rate paid on excess reserves. I have said charge interest on excess reserves. They'd find credit-worthy borrowers.

The Fed has been pushing on a string. I'm talking about using a rod.

The tool is there.

It's not my first choice by any means. As I've said, I'm not a fan of the Federal Reserve System.

Update: October 14, 2013:

I found this interesting: "Money multipliers, real and imagined" http://www.themoneyillusion.com/?p=24029

It appears to me that the way Scott Sumner has employed the term "stable" is akin to what I've been saying here in this series. It is, of course, a complicated subject for among other reasons, that it is loaded with jargon subject to semantical misunderstandings.

So, I don't intend to be putting usages in Scott's mouth. I'm only saying how the use of the term "stable" there strikes me vis-a-vis what I've been saying about the conscious lack of the practical application of the multiplier as opposed to it being dead, which is so finite, in secular terms anyway.

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

Donate


The following should appear at the end of every post:

According to the IRS, "Know the law: Avoid political campaign intervention":

Tax-exempt section 501(c)(3) organizations like churches, universities, and hospitals must follow the law regarding political campaigns. Unfortunately, some don't know the law.

Under the Internal Revenue Code, all section 501(c)(3) organizations are prohibited from participating in any political campaign on behalf of (or in opposition to) any candidate for elective public office. The prohibition applies to campaigns at the federal, state and local level.

Violation of this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. Section 501(c)(3) private foundations are subject to additional restrictions.

Political Campaign Intervention

Political campaign intervention includes any activities that favor or oppose one or more candidates for public office. The prohibition extends beyond candidate endorsements.

Contributions to political campaign funds, public statements of support or opposition (verbal or written) made by or on behalf of an organization, and the distribution of materials prepared by others that support or oppose any candidate for public office all violate the prohibition on political campaign intervention.

Factors in determining whether a communication results in political campaign intervention include the following:

  • Whether the statement identifies one or more candidates for a given public office
  • Whether the statement expresses approval or disapproval of one or more candidates' positions and/or actions
  • Whether the statement is delivered close in time to the election
  • Whether the statement makes reference to voting or an election
  • Whether the issue addressed distinguishes candidates for a given office

Many religious organizations believe, as we do, that the above constitutes a violation of the First Amendment of the US Constitution.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

That said, we make the following absolutely clear here:

  • The Real Liberal Christian Church and Christian Commons Project not only do not endorse any candidate for any secular office, we say that Christianity forbids voting in such elections.
  • Furthermore, when we discuss any public-office holder's position, policy, action or inaction, we definitely are not encouraging anyone to vote for that office holder's position.
  • We are not trying to influence secular elections but rather want people to come out from that entire fallen system.
  • When we analyze or discuss what is termed "public policy," we do it entirely from a theological standpoint with an eye to educating professing Christians and those to whom we are openly always proselytizing to convert to authentic Christianity.
  • It is impossible for us to fully evangelize and proselytize without directly discussing the pros and cons of public policy and the positions of secular-office holders, hence the unconstitutionality of the IRS code on the matter.
  • We are not rich and wouldn't be looking for a fight regardless. What we cannot do is compromise our faith (which seeks to harm nobody, quite the contrary).
  • We render unto Caesar what is Caesar's. We render unto God what is God's.
  • When Caesar says to us that unless we shut up about the unrighteousness of Caesar's policies and practices, we will lose the ability of people who donate to us to declare their donations as deductions on their federal and state income-tax returns, we say to Caesar that we cannot shut up while exercising our religion in a very reasonable way.
  • We consider the IRS code on this matter as deliberate economic duress (a form of coercion) and a direct attempt by the federal government to censor dissenting, free political and religious speech.
  • It's not freedom of religion if they tax it.

And when they were come to Capernaum, they that received tribute money came to Peter, and said, Doth not your master pay tribute? He saith, Yes. And when he was come into the house, Jesus prevented him, saying, What thinkest thou, Simon? of whom do the kings of the earth take custom or tribute? of their own children, or of strangers? Peter saith unto him, Of strangers. Jesus saith unto him, Then are the children free. (Matthew 17:24-26)

  • Subscribe


  • 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.
    This entry was posted in Monetary Reform. Bookmark the permalink.