"When I’ve engaged advocates of debt-free money, my protestations always generate confusion and the topic gets switched to government payment of interest. The “debt-free money” cranks seem to hate payment of interest by government. I’m not sure, but I think what they really want to do is to prohibit government payment of interest. That is fine with me. ZIRP forever. Stop paying interest on bank reserves, and stop issuing Treasury bills and bonds."

I'm glad to see you say you agree.

As for the use of the term "cranks" while pointing out an issue of semantics, why? The use of the term debt as applying to interest owed by the government is a perfectly legitimate connotation. I often say interest-free money or debt- and interest-free just so the general public might start to draw any connection at all.

You went on a long time trying to prove that money is always debt. It does not have to be. It can be nothing more than a medium of exchange. I have money that is owed to no one. That money is not a debt, per se. No one can look at it and rightly say that someone or group owes something as a result of the fact that it is simply money sitting there, with the exception of the mere existence of Treasurys, which one might rightly argue has some attachment to that money; but that really is a collective argument (the "debt" in debt-free) where I'm discussing the money on my individual level only. So what I just said represents two connotations, both different from yours (which I also consider valid but obviously not to the exclusion of my two connotations mentioned here). Perhaps I'm not as arbitrary as are you when thinking about these matters.

I recall your discussion on the Money Multiplier being dead and that when I attempted to engage a bit concerning the semantics and some other points, you dismissed it and didn't engage upon my follow-up. I was criticized in the LinkedIn MMT group for thinking that you "owed" me a reply, you being a professor of economics while I'm apparently a nobody. Of course, I didn't tell the group that you owed me anything but simply that you had not yet replied. I was simply anticipating anyone wondering whether you had answered.

My question concerning the Money Multiplier was far from unreasonable, and I was fully open to hearing something from you that I might not know about how the Fed actually handles its legal ability to sanction banks (at the Fed's discretion) that don't have sufficient reserves. It was not a question about which comes first: the horse or the cart. Is the multiplier dead because the Fed has chosen not to enforce it? I'm not claiming to know. I have heard you about loans being made first. It's not completely the same issue. That banks can create credit first does not actually answer the question.

A clear explanation about the mechanics would be helpful. Maybe you don't know either on that level. I've considered putting it to the Fed, but maybe you could do it since you're not a "nobody" and let me know their answer.

Back more directly to topic of your article, what you wrote above is not lost on me. I have understood for a long time your point about taxes being the practical reason why Federal Reserve Notes (tangible or cyber units) are sought. It's fine. I also have understood the accounting principles.

You actually stated a great deal of common ground in very few words (not your debt argument portion) but in the process, thumbed so many in the eye over nothing but an issue of semantics concerning which you cannot win or lose.

Why not make your next post about advocating for public policies and practices to stop issuing Treasury bills and bonds? That's what I've been advocating for many years now.

Thank you in advance for your consideration.

I suggest you read the text of the National Emergency Employment Defense Act of 2011: https://www.govtrack.us/congress/bills/112/hr2990... which is based upon the Chicago Plan.

Commercial banks may still lend.

The Monetary Authority (MA) is somewhat as the Fed is now, which I don't like.

However, the infrastructure financing method is great compared to what we have now.

The MA in my view should be an open source computer program system that would peg the supply of money to real productivity. If done correctly, it should result in no inflation or deflation and never a shortage of funds.

Please note that the currency would be debt-free (no bonds), nobody earning passive income off the issuance of US currency. In case anyone is concerned, there would be all the money needed to assure nobody would live in poverty, far from it.

You didn't mention the issue of Aleksei Navalny's nationalism and history of ethnically bigoted statements.

In addition, I would like to see some documentation for the claims made about how Vladimir Putin handles things "through corruption." I haven't seen any remotely hard evidence against him in quite a few years, and it wasn't financial even then.

He does live like a very wealthy king (multibillionaire). We'll have to see how he lives after leaving office.

I'm open to evidence of current corruption of the type alleged in your article, Ed.

Thanks.

(cont.)

(c) Cash items forwarded to a Federal Reserve Bank for collection and credit are not included in an institution's balance maintained to satisfy its reserve balance requirement until the expiration of the time specified in the appropriate time schedule established under Regulation J, “Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers Through Fedwire” (12 CFR part 210). If a depository institution draws against items before that time, the charge will be made to its account if the balance is sufficient to pay it; any resulting deficiency in balances maintained to satisfy the institution's reserve balance requirement will be subject to the penalties provided by law and to the deficiency charges provided by this part. However, the Federal Reserve Bank may, at its discretion, refuse to permit the withdrawal or other use of credit given in an account for any time for which the Federal Reserve Bank has not received payment in actually and finally collected funds.
...
[Reg. D, 74 FR 25638, May 29, 2009, as amended at 77 FR 21853, Apr. 12, 2012] http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&...
Then there's this:
§ 204.6 Charges for deficiencies.

(a) Federal Reserve Banks are authorized to assess charges for deficiencies at a rate of 1 percentage point per year above the primary credit rate, as provided in § 201.51(a) of this chapter, in effect for borrowings from the Federal Reserve Bank on the first day of the calendar month in which the deficiencies occurred. Charges shall be assessed on the basis of daily average deficiencies during each maintenance period.

(b) Reserve Banks may waive the charges for deficiencies based on an evaluation of the circumstances in each individual case.
...
[Reg. D, 74 FR 25639, May 29, 2009, as amended at 77 FR 21854, Apr. 12, 2012] <a href="http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=13fee6af8cffba8193805d4e9c840670&r=SECTION&n=12y2.0.1.1.5.0.2.6" target="_blank">http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=13fee6af8cffba8193805d4e9c840670&r=SECTION&n=12y2.0.1.1.5.0.2.6
Are you claiming the Fed allowed waivers concerning up to some 90% of reserve requirements in the aggregate? I could ask many questions here but feel it better to simply ask you to clarify and elaborate.

For my part, let me say that I was aware of the compliance dates and that lending could, and does, occur before the lending banks have the reserves necessary to meet the requirements. I was also aware that the Fed can create, and has created, all the reserves it wants at its sole discretion. My point though is that much of the massive reserves created post-Great Recession onset have not been used by the banks against new loans, which would have moved excess reserves to regular reserves, but have rather been left in excess-reserve accounts earning the banks interest from the Fed. My understanding is that the Fed has entertained reducing the interest paid and even charging interest on excess reserves but in its mind, realizes the banks haven't had the borrowers who could meet the lending standards in order to put all those excess reserves to work.

So, where do we differ?

Thank you, Randy, for your reply.
Electronic Code of Federal Regulations
TITLE 12--Banks and Banking
CHAPTER II--FEDERAL RESERVE SYSTEM
SUBCHAPTER A--BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS (REGULATION D)
§ 204.4 Computation of required reserves.

(d) For institutions that file a report of deposits weekly, reserve requirements are computed on the basis of the institution's daily average balances of deposits and Eurocurrency liabilities during a 14-day computation period ending every second Monday.

(e) For institutions that file a report of deposits quarterly, reserve requirements are computed on the basis of the institution's daily average balances of deposits and Eurocurrency liabilities during the 7-day computation period that begins on the third Tuesday of March, June, September, and December.
...
[Reg. D, 74 FR 25637, May 29, 2009, as amended at 74 FR 52875, Oct. 15, 2009; 75 FR 65564, Oct. 26, 2010; 76 FR 68066, Nov. 3, 2011; 77 FR 21852, Apr. 12, 2012; 77 FR 65774, Oct. 31, 2012] <a href="http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=13fee6af8cffba8193805d4e9c840670&rgn=div8&view=text&node=12:2.0.1.1.5.0.2.4&idno=12" target="_blank">http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=13fee6af8cffba8193805d4e9c840670&rgn=div8&view=text&node=12:2.0.1.1.5.0.2.4&idno=12
Obviously from that, express regulations allow lending before reserves are required. However, there are deadlines.

Essentially, more of the same:
§ 204.5 Maintenance of required reserves.

(b)(1) For institutions that file a report of deposits weekly, the balances maintained to satisfy reserve balance requirements shall be maintained during a 14-day maintenance period that begins on the third Thursday following the end of a given computation period.

(2) For institutions that file a report of deposits quarterly, the balances maintained to satisfy reserve balance requirements shall be maintained during an interval of either six or seven consecutive 14-day maintenance periods, depending on when the interval begins and ends. The interval will begin on the fourth Thursday following the end of each quarterly reporting period if that Thursday is the first day of a 14-day maintenance period. If the fourth Thursday following the end of a quarterly reporting period is not the first day of a 14-day maintenance period, then the interval will begin on the fifth Thursday following the end of the quarterly reporting period. The interval will end on the fourth Wednesday following the end of the subsequent quarterly reporting period if that Wednesday is the last day of a 14-day maintenance period. If the fourth Wednesday following the end of the subsequent quarterly reporting period is not the last day of a 14-day maintenance period, then the interval will conclude on the fifth Wednesday following the end of the subsequent quarterly reporting period. (cont.)

I submitted this comment earlier, but it never showed up. It then occurred to me that I had javascript off for this site. I turned it on and discovered the Intense Debate commenting system. Here's my comment again for the first time:

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.

Thanks,

Tom

"New rules developed in cooperation with the federal government require drilling companies to list the chemicals they use for fracking...disposed of via deep well injection...." Out of sight, out of mind? Just how long were the studies conducted in ruling out toxic migration? Do you honestly suppose current technology can "see" that far down in the ground the specific contamination moving into, and with, water in every direction it moves? I'd say sometimes glacially, but considering anthropogenic global warming and what it's been doing to 90%+ of the world's glaciers, I'll substitute in "a snail's pace."

That aside, you failed to mention artificial earthquakes.

It seems to me that profits cloud your judgment. There is posterity to consider; and what with advancement in anti-aging, perhaps many people who were thinking in terms of a few decades will literally live to regret their fracking a few more decades after that.

It may be that science and technology will be able to go in then and clean up the mess, but that's quite a gamble just for the sake of making a few more bucks right now when there are perfectly better alternatives available (all that drilling and all that water, I think about geothermal) if we will only think more cooperatively rather than laissez-faire.

Hi Ed,

Michael Hudson and others argued for the Baltics to go more along the lines of what might be termed the Icelandic route. What's your view on that? If you agree they should have, is it too late?

Here some debate on the subject that seem quite relevant to your article: http://www.econmatters.com/2012/07/krugman-vs-cfr...

Thanks!

cont.:

When David again pointed out the incorrect statement about the APA's official position, Alan then asked David what Wayne said that was incorrect. That appeared to be Alan not hearing David.

When David asked, "Are you going to let me talk," Alan didn't hear Wayne interrupting? Well, he finally couldn't help hearing it.

It is frustrating to deal with someone like Besen. Wayne Besen is intellectually dishonest. It's blatant.

David very passionately expressed the truth about homosexuals abusing boys and creating confusing unwanted same-sex attraction (SSA), which boys will be outlawed by SB 1172 from obtaining professional help in California for that unwanted SSA if that law is allowed to take effect at the end of 2012.

A confused, homosexually raped boy with resultant SSA is more than fine with Wayne Besen.

Besen is claiming David Pickup is being dishonest about David's firsthand knowledge that the abuse that David suffered caused David's own orientation confusion. How does one deal with a guy like that? Besen is lucky that David isn't litigious about it.

David is more interested in focusing upon getting the law straightened out so that wounded boys and girls who've been abused or neglected or smothered, or whatever, and are suffering unwanted same-sex attraction as a direct result of it are not blocked from the help they want and will benefit them.

cont.:

David Pickup very correctly stated that Wayne Besen was "cherry picking" the research. When David correctly stated that the APA (American Psychological Association) admits that it has no proof of any harm done by authentic Reparative Therapy, Besen ignores that Besen had said that there is causality and that the APA says there is harm.

The truth is that some SOCE (Sexual Orientation Change Efforts) include working on the de-feminization of some males via sports. In addition though, they use sports on the lesser- and non-effeminate as a means to promote a particular type of male bonding (non-sexual) that has been absent in so many lives. Besen is suggesting that such efforts are intended only to toughen-up. They clearly are not.

Also, when a researcher gathers data and then interprets that data, it doesn't make the data out of bounds for others to interpret differently. Besen is more than suggesting that NARTH has no right to have a different interpretation from some researcher's report on that researcher's data. Besen's view flies in the face of the whole point of peer-review.

Wayne Besen would have you falsely believe that there are no people who have changed and stayed that way, but David Pickup supplied the URL: voices-of-change dot org.

Besen says that "basically, anyone with a degree says that what you [David] do is harmful...." Besen said that even after David Pickup corrected him earlier about that. The APA doesn't say that. They merely speculate and some within their membership say it's risky in their opinion -- without any evidence whatsoever, only self-reporting by homosexuals who were not stable before the therapy. No cause and effect concerning harm has been established. Besen ignores that, avoids that, on purpose. They also have no proof that Reparative Therapy is ineffective. They couldn't because it is effective, per the people who have undergone it and are glad they did, as David Pickup so correctly stated. David Pickup knows them personally from his own practice. Those people are not being paid to say they've changed. Everyone of them should be offended by Wayne Besen and should stand right up publicly and denounce Wayne Besen for the false-propagandist that he so clearly is.

Besen says that "most" of the members of NARTH have "strip mall" degrees. Has he looked at NARTH's board and where they went to school. Anyway, I don't put much stock in all of that. I'm interested in the facts, and the fact is that people can and do change. There's nothing Besen can do about it, and he's losing the debate. The more people get to hear David Pickup and others like him, the better.