Endogenous versus Exogenous Money

[Joe Leote]

This is a short essay covering much information about the debate over
Endo/Exo -genous money:

http://cas.umkc.edu/econ/economics/faculty/wray/papers/Desai.pdf

one item of note is the idea that Treasury securities provide a type of
"endogenous" liquidity that renders Fed control over the monetary base
less effective as an "exogenous" factor. Very good discussion of money
as unique to an economic context.

Joe

[Joe Leote]

Padagogical Approaches to Theories of Endogenous versus Exogenous Money
http://www.boeckler.de/pdf/v_2008_10_31_kinsella.pdf

This paper compares the treatment of money in post graduate
macro-economic textbook models, one conventional and the other stock
flow consistent model. Excellent discussion of core ideas.

Joe

[John Hermann]

Thanks Joe.

It may be argued that the processes of the government selling sovereign bonds to the private sector, and their subsequent purchase from the private sector by the central bank, are the equivalent (putting aside the issue of the flow of interest) of the government selling those bonds directly to the central bank, thereby enabling it to introduce newly created money into the economy -- as required for its healthy development.  On this basis it has been argued that it is not really necessary to have the government going to the trouble of manufacturing bonds at all.  Thus the central bank would simply create base money according to the economy's perceived needs, in collaboration with Treasury.  This is the pure exogenous route -- with all its attendant potential dangers.

If one prefers the endogenous route (which is my position), then one needs to devise a mechanism for implementing it.  And at present the universally accepted mechanism is open market operations (buying and selling sovereign securities, in order to manipulate interest rates in such a manner as to keep inflation within certain agreed bounds).  If anyone can think of a better mechanism for implementing an endogenously driven banking system, I would be very interested to learn how it operates.      

John Hermann

[Jean Erick]

     Add a tier exponent to all money accounts.  The tier number would increase everytime the money was loaned.  Interpolate for partials.  Lower numbers equal

call priority.

     The problem of money has been its secrecy.  This idea identifies money as to it's characteristic, not its owner.

 Market risk analysis would take care of the issue.  This is a mechanism which would allow an entirely free market based approach to work.

     The main problem has always been increasing debt.  This is the first time it would be quantified and subject to the restrictions inhearant in market risk analysis.

Nobody would like it.  It would subjugate everybody to the reality of the risk analysis of the market.  It would force a smoothly funtional system on everybody.

 

James