Akira MATSUMOTO (akiram@mail.ucr.edu)
Wed, 15 Dec 1999 12:39:58 -0800
Dear Member
By the way, the debate called the money supply was already hold in Japan in
the mid of the '90s.
In this debate a several econimists asserted that the Bank of Japan should
increase the money supply by increasing the base money. On the other hand,
the Bank of Japan argued that it couldn't operate the amount of the money
supply or the base money directly, because the supply of moeny or the base
money by the BoJ is always passive to the demand of money by the commercial
banks.
This debate was recognized as the contemporary version of the currency
controvercy which was hold during the mid of 18C in England.
Moreover, I'd like to show the banker's opinion about the nature of the
Banknote. He was a banker and an executives of the Bank of Japan. His name
is NISIKAWA, Motohiko.
Mr. Nishikawa explained the inconvertible central banknote as the liability
of the centaral bank in the following way.
(a premise process)
*First of all, the trade occurs by drawing of the commercial bill (a stage
of the commercial credit).
*Then, the deposit money is created in discounting this commercial bill (a
stage of the commercial bank credit).
*At last, the Banknote is supplied in rediscouting this commercial bill by
the centaral bank (a stage of the centaral bank credit).
"Supposing that the we are actually asked to pay off the inconvertible
Banknote. In this case, we still have to ask to pay off the rediscounted
bill (the security reserve asset). Therefore this reimburesment claim should
reach from the commercial banks to dealers and makers in turn. On the last
stage, ------ we(the Bank of Japan) takes the first commodity back and makes
our payoff to the possessor of the Banknote by this commodity. In reality,
you don't take such a roundabout way. When the possessor of the Banknote buy
this same commodity in the market, it is the same result as the payoff for
the credit of the Bnaknote. Eventually the Banknote which the seller of that
commodity got in the market, is used for the repayment of the first
loan(discounting of bill). That is, both the discounting credit and the debt
of the Banknote are actually disappeared on the central bank account at the
same time. The imaginary payoff is realized on the market transactions
indirectly. ------- The inconvertibile Banknote isn't paid off by gold, but
we can admit that the Banknote has a kind of repaymentablity."(The Central
Bank, 1984, Toyokeizaishinposha, Publishing Co., Ltd., pp.47-48 )
That is, he claimed that the debt of the central bank is paid off by the
commodity by which the rediscounting bill is guaranteed.
bye
Best Wish
Akira
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MATSUMOTO, Akira
Visiting Scholar
Department of Economics,
University of California, Riverside
1150 University Avenue
Riverside, CA 92521-0427 USA
Phone 909-787-5037x1575 or X1570
Fax 909-787-5685
Email: akiram@mail.ucr.edu
________________________
Associate Professor on Money and Banking
Department of Comprehensive Policy Making
school of Law & Letters
EHIME University
Matsuyama, Ehime
790-8577, Japan
Tel:+81-89-927-9237(office)
FaX: +81-89-927-8916
E-mail: amatsu@ll.ehime-u.ac.jp
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