Gerald Levy (glevy@PRATT.EDU)
Thu, 16 Dec 1999 04:09:19 -0500 (EST)
---------- Forwarded message ----------
Date: Thu, 16 Dec 1999 01:35:07 EST
From: Akira MATSUMOTO
Dear Dr.Cottrell and Member
First of all, I show your mail.
At 6:36 PM -0800 99.12.15, Allin Cottrell wrote:
> On Wed, 15 Dec 1999, Akira MATSUMOTO wrote:
>
> > 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.
>
> I don't understand that. If there is government debt
> outstanding, the central bank always has the option of buying
> some (from the banks or their customers) and hence increasing
> the monetary base. As I've said earlier though, this may not be
> very effective in raising overall money supply if the banks are
> unwilling to lend or their customers unwilling to borrow.
As you mentioned, if you realize that * As I've said earlier though, this may
not be very effective in raising overall money supply if the banks are
unwilling to lend or their customers unwilling to borrow*, I should consider
that you realize the passivity of the money suuply of the central bank.
In fact, even though there is government debt outstanding, if market (the
commercial banks, financial institutions and so on) doesn't demand the base
money (without increasing of required reserves, that is, increasing of credit
creation by the commercial bank), the more the central bank sells the
government bond, the lower the price of the bond only goes down to 0%. The
money supply doesn't increase and the amount of repayment to the central bank
by the commercial bank increases.
I need a more space for explanation of the mechanism of the money supply. But
I'd like to keep it at a minimum here because of my capacity.
Anyway what I want to say is that under the contemporary credit system the
government bond is a kind of outside-factors to the money supply. I think
that the government bond is the essencial factor of inflation. But when we
think about the circulation of the contemporary currency, it is the second
factor. What we should think is when and how the credit money change to the
paper money. And the low of money which Marx clarified underlies this
situaiton.
In other words, once the credit system prevails thoroughly, the credit money
can replace gold or the commdity money perfectly. Therefore we appearently
see the demonetization of gold, or the euthanasia of gold. But even
inconvertible credit money cannot escape from the low of money circulation.
So the inflation could occur.
P.S.
On Sat, 11 Dec 1999, Duncan K. Foley wrote:
> The State might be able to force the coins to circulate
> using police power, but can it enforce their value?
Allin Cottrell wrote
>They can raise the exchange value of coin by decreasing their
>emission or increasing the tax liability.
increasing the tax liability = raising the exchange value of coin, that is,
decreasing the prices ??????
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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